Oil prices finish lower after Hurricane Beryl leaves energy infrastructure largely unscathed

By Myra P. Saefong and William Watts

Forecasts for active storm season could mean more volatility for oil and natural-gas prices in months ahead

Oil futures declined on Tuesday, with U.S. benchmark crude prices settling at their lowest in nearly two weeks, after Hurricane Beryl appeared to do little lasting damage to energy facilities following the storm's landfall on the Texas coast a day earlier.

Price moves

West Texas Intermediate crude CL00 for August delivery CL.1 CLQ24 declined by 92 cents, or 1.1%, to settle at $81.41 a barrel on the New York Mercantile Exchange, the lowest front-month contract finish since June 26, according to Dow Jones Market Data.September Brent crude BRN00 BRNU24, the global benchmark, fell $1.09, or 1.3%, to $84.66 a barrel on ICE Futures Europe, the lowest since June 17.August gasoline RBQ24 lost 0.4% to $2.53 a gallon, while August heating oil HOQ24 fell nearly 2.2% to $2.52 a gallon.Natural gas for August delivery NGQ24 settled at $2.34 per million British thermal units, down 0.9%.

Market drivers

So far, Hurricane Beryl's impact on the physical oil and gas markets "appear to be limited, and critically, expectations are that operations will be fully restored quickly, which means the impact on financial energy markets is not expected to be significant," Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

Multiple refineries that were shut as a precaution ahead of the storm's landfall are already back online or in the process of coming online, while the Houston Ship Channel is expected to reopen fully on Wednesday, he said.

Beryl made landfall Monday morning as a Category 1 hurricane, knocking out power for millions of people and leading to the cancellation of around 1,700 flights. There were seven confirmed deaths related to the storm in the Houston area, according to the Houston Chronicle.

Earlier this month Beryl became the earliest Category 5 hurricane on record in the Atlantic Ocean, stoking fears of an active storm season.

While the storm was seen as crimping demand, the effect on supply was limited because the hurricane's path spared most of the platforms in the Gulf of Mexico, noted Carsten Fritsch, commodity strategist at Commerzbank. Only around 70,000 barrels a day of production had to be suspended, which will be "hardly visible" in weekly Energy Information Administration statistics, he said.

But with an active storm season expected, "it is likely that Beryl will not be the only hurricane to reach the Gulf of Mexico this year. The risk of disruptions to oil and gas production, processing and exports therefore remains," Fritsch wrote. "This suggests greater volatility in oil and gas prices in the coming months."

Over in the Middle East, there is some hope that a ceasefire can be reached in Gaza, with "ongoing negotiations that have so far yielded nothing that would lead to significant change in the current situation," said Samer Hasn, market analyst at XS.com, in emailed commentary.

A "cessation of hostilities would remove the specter of a regional war preparing to erupt from the gates of southern Lebanon, and it may extend to include more than one country in the region or even outside it, thus maintaining a state of uncertainty in energy markets," he said.

Meanwhile, Rystad Energy reported improved compliance among the Organization of the Petroleum Exporting Countries and their allies with their production-cut agreement. Data showed OPEC+ output was "slightly above" target by 53,000 barrels per day in June, averaging production of 33.903 million bpd.

Claudio Galimberti, global market analysis director at Rystad Energy, said in a market update that both crude and petroleum liquids balances are expected to remain tight in the second half of this year, leading to significant stock draws on the back of "high summer demand supported by road transportation and strong aviation and ... with OPEC+ improving compliance with production cuts."

Meanwhile, Sevens Report's Richey said that the most important catalyst on his radar for this week is the Energy Information Administration's petroleum supply report due out Wednesday morning.

Last week's inventory numbers were "clearly skewed by a combination of preventative physical market movements" amid concerns about Beryl and as traders closed the books on the second quarter, he said.

Strategists at Macquarie expect the EIA to report a drop of 1.2 million barrels in U.S. commercial crude inventories for the week that ended July 5. They also forecast a weekly inventory decline of 1.8 million barrels for gasoline and a supply increase of 1.7 million barrels for distillates.

-Myra P. Saefong -William Watts

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07-09-24 1541ET

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