The impact of Hurricane Ida is lasting more than the market expected and as some oil production capacity remains shut this week, prices are rising on supply not being restored and therefore not reaching refineries that have restarted operations quicker than producers.
The threat of more disruptions from extreme weather is also a cause of concern for producers and a reason for traders to add price premiums, as the new Tropical Storm Nicholas in the Gulf of Mexico could turn into a hurricane and hit Texas in coming days.
Although BSEE’s latest update on Hurricane Ida on Sunday showed US GoM production had recovered about 320,000 bpd compared to Friday’s reporting,  this could soon be turned around if Nicholas turns into a Hurricane.
Nicholas could impact loadings at the ports and also refineries, and turn last week’s rising number of working rigs around again. Â
However, despite Hurricane Ida has being unusually net-bullish on supply-demand, the impact of additional Hurricanes is not yet known and there is a risk when the market is drawing bullish price conclusions ahead of time.
The OPEC monthly report that the market will receive today could further support prices as a downwards revision  is expected to its demand growth forecasts for 2021 and 2022.
OPEC’s research team had been rather optimistic previously on its recovery projections, so the market could now receive a reality check by the oil producer group.
Although the market is bullish, downside risks still abound from variants and additional lockdowns, as China has found additional mutant cases in the Fujian province.
On the non-US supply side, Iran’s return to the market continues to remain unlikely despite the country reporting that talks with IAEA are going in a positive direction.
Nevertheless, in case of a deal, Iran could offer the market as much as one million barrels per day by the end of 2022. A scenario that for the moment seems stretched.
Last but not least, China’s plan to release strategic reserves to the market is a wild card for the market and could cause some price fluctuation when its details are unveiled, so traders will be looking for clues this week.
