New York Oil Prices Rebound by Over 2% for Second Day

New York oil prices have rebounded by more than 2% for the second day, driven by concerns over supply and demand instability. A hurricane made landfall in the Gulf of Mexico, causing some crude oil production facilities to shut down.

On the 12th (local time), West Texas Intermediate (WTI) crude oil for October delivery, the nearest month, closed at $68.97 per barrel on the New York Mercantile Exchange, up $1.66 (2.47%) from the previous trading day.

The price of Brent crude oil for November delivery, a global benchmark, closed at $71.97 a barrel, up $1.36, or 1.93%, from the previous day.

The New York crude oil market, which was gripped by fear after falling 4.3% in just one day on the 11th, has rebounded by more than 2% for two consecutive days, returning to the level before the plunge. The price of WTI has soared 4.90% in two trading days up to this day.

The trigger for the 4% plunge two days ago was the Organization of Petroleum Exporting Countries (OPEC) lowering its forecast for crude oil demand for next year for the first time in two months. The spread of recession fears in the major oil consumers, the United States and China, had put strong downward pressure on oil prices.

The rebound that day was triggered by concerns that U.S. crude oil supplies could be disrupted by the hurricane. The U.S. Bureau of Safety and Environmental Enforcement (BSEE) said the hurricane had knocked out about 24 percent of crude oil production in the Gulf of Mexico, or 730,000 barrels per day.

According to the U.S. National Hurricane Center, 39% of the region’s oil production facilities were closed the day before as Category 1 Hurricane Francine made landfall in the Gulf of Mexico.

“The recent plunge in oil prices appears to be a reflection of oil investors’ perception that OPEC lacks the ability to cut production at low prices,” said Giovanni Staunovo, an analyst at UBS. “Oil prices are likely to continue to rise for the time being.”

“We expect crude oil inventories to decline further as supply lags demand growth,” Staunovo said. “Given the small size of speculative positions, we maintain our view that Brent will return to above $80 a barrel in the coming months.”