Oil, Gasoline Futures Show Muted Ida Impact

Oil prices gained about 1% on Monday in the wake of Hurricane Ida, seemingly indicating that markets are confident the US petroleum complex can bounce back quickly from the upstream and downstream outages caused by the storm. The sheer size of the upstream and downstream capacity shut in by Ida, as well as an incomplete assessment of damage and restart times, will add an additional element of volatility to oil prices (related). In London, the October contract for ICE Brent gained 71¢ on light trading to finish at $73.41 per barrel. But that contract expires on Tuesday and the front-month price will become the November contract, which edged up 53¢ on Monday to $72.23/bbl. In New York, the October contract for West Texas Intermediate rose by 47¢ to end the session at $69.21/bbl. Supply Focus In addition to the severe weather in the US Gulf of Mexico, oil markets were buoyed by a statement from Kuwait’s oil minister suggesting Opec-plus may have to reconsider its tapering of output cuts at this week’s meeting. Mohammad Abdulatif al-Fares suggested to Reuters over the weekend that the alliance should reconsider halting the gradual output increase starting in September due to Covid-19 restricting forecast demand growth. However, many observers believe that Opec-plus heavyweights like Saudi Arabia and Russia will resist amendments to the July deal, which called for boosting output by 2 million barrels per day from August through December (IOD Aug.30'21). Stragglers like Nigeria and Algeria are likely to be able to produce at target, while the additional volumes that markets had expected from Iran late in the year are looking increasingly unlikely. Gasoline Gains Futures for gasoline, known as RBOB, gained about 1.5% on Monday on expectations that refineries affected by Ida might take a week or more to come back on line. The front-month RBOB for September gained 3.8¢ to settle at $2.312 per gallon. Trading volumes were light since the contract also expires on Wednesday. The soon to be front-month October contract saw high trading volumes on Monday and finished up 3.4¢ at $2.153/gallon. With gasoline prices outpacing crude oil, the gasoline crack fared well on Monday, rising over 3% to $21.30. How the crack fares in upcoming days will be closely watched by refiners as they scramble to restart units as soon as possible. Gary Peach, New York