Crude prices edged higher on Wednesday as Hurricane Idalia approached Florida, posing a risk to oil production in the Gulf of Mexico.
Concerns Over Hurricane Idalia
Continuous-contract futures for benchmark West Texas Intermediate crude increased by 0.8%, reaching $81.80 a barrel, which is the highest level seen since mid-August.
Idalia has intensified into a Category 4 hurricane and is projected to make landfall along the Gulf Coast of Florida early Wednesday, posing a significant threat to an important area for oil production.
Impact on Oil Output
Investors are growing more apprehensive about Hurricane Idalia’s impact on the Gulf of Mexico, which accounts for approximately 15% of U.S. oil output and around 5% of natural gas production. The storm’s disruption is likely to affect these energy production figures, according to Jeremy Naylor, an analyst at broker IG.
Effects on Energy Operations
As the storm approaches, Chevron (ticker: CVX) has already evacuated personnel from three offshore oil platforms, while Kinder Morgan (KMI) is planning to shut down a petroleum pipeline, as reported by Reuters.
Other Factors at Play
Aside from Hurricane Idalia, other factors are also contributing to the rise in oil prices. Late Tuesday, the American Petroleum Institute released figures suggesting a potential tightening of supply. The API reported an 11.5 million-barrel decrease in crude stocks, surpassing analysts’ expectations of a 2.9 million-barrel drop.
Additionally, Gabon, a significant African oil producer and member of OPEC (Organization of the Petroleum Exporting Countries), is currently experiencing a reported coup, with military officers claiming to have seized control of the government.