Oil prices crept up today as supply concerns from a hurricane hurtling towards the US Gulf Coast limited bearish sentiment about the possibility of another US interest rate hike undercutting demand.
Brent crude edged 63 cents higher at $85.05 a barrel this morning, while US West Texas Intermediate crude ticked up 57 cents to $80.67 a barrel.
Tropical Storm Idalia lashed western Cuba yesterday and was almost a hurricane as it headed toward Florida. The storm is likely to cause power outages and could impact crude production on the eastern side of the US Gulf Coast.
The jitters follow a fire at a Marathon Petroleum refinery last week, after a chemical leak ignited two giant storage tanks filled with volatile naphtha.
The company said yesterday it planned to restart units at the 596,000-barrel-per-day (bpd) Garyville, Louisiana, refinery, the third largest in the US.
"Such incidents will remain catalysts in upward movement as the oil community is currently very sensitive to interruptions to any refinery, anywhere in the world," said John Evans of oil broker PVM.
Meanwhile, Chevron's two major liquefied natural gas (LNG) production facilities in Australia - that account for more than 5% of global LNG capacity - could face daily work stoppages of up to 10 hours next week after unions today threatened labour action in a dispute over pay and conditions.
Power markets will run as a timely ally for a product-led oil rally, added PVM's Evans.
Still, oil demand worries fester in the world's two biggest economies - the US and China.
Federal Reserve Chair Jerome Powell on Friday said the Fed may need to raise rates further to cool stubborn inflation.
China's post-pandemic economic recovery has sputtered due to a worsening property slump, weak consumer spending and tumbling credit growth, prompting Beijing to cut key policy rates to shore up activity in the world's biggest oil importer.
Eyes are also on economic data from key economies later this week to help determine the path of interest rates this year and next.
"It may be difficult for oil prices to maintain the strong bull trend (seen) in July at this stage. The US and European economies will face downward pressure in the fourth quarter until interest rates peak," said CMC Markets analyst Leon Li.
