U.S. crude oil prices fell for the third consecutive session on Tuesday as Gulf Coast oil infrastructure showed resilience, avoiding substantial damage from Tropical Storm Beryl. After making landfall as a Category 1 hurricane in Matagorda, Texas, on Monday, Beryl weakened to a tropical storm and later a tropical depression, now situated north of Shreveport, Louisiana, according to the National Hurricane Center.
"Hurricane Beryl has not only dumped water on all in its path, but it has also quenched some of the bullish fervor that was slowly developing within the oil fraternity," said John Evans, an analyst at oil broker PVM, in a note on Tuesday.
As of Tuesday, energy prices reflected the market's muted reaction:
- West Texas Intermediate (WTI) August contract: $82.07 per barrel, down 26 cents or 0.32%. Year-to-date, U.S. oil has gained 14.5%.
- Brent September contract: $85.51 per barrel, down 24 cents or 0.28%. Year-to-date, the global benchmark is ahead by 10.9%.
- RBOB Gasoline August contract: $2.53 per gallon, little changed. Year-to-date, gasoline is up 20.6%.
- Natural Gas August contract: $2.38 per thousand cubic feet, up 1 cent or 0.72%. Year-to-date, gas is down 5%.
The port of Corpus Christi, a leading oil export terminal, has transitioned to post-storm recovery without significant impact, according to a statement. However, all terminals at the port of Houston remain closed for damage assessment and repair. Shell reported it is redeploying personnel to its Perdido platform in the Gulf of Mexico after shutting in production last Friday due to the approaching storm.
Despite the potential for significant disruptions, the market's reaction to Beryl has been subdued. Evans noted that Beryl might serve as a harbinger for the remainder of the season. Colorado State University has forecast an "extremely active Atlantic hurricane season," predicting 11 hurricanes, above the average of 7.2 storms from 1991 to 2020.
Market attention is now shifting towards the release of U.S. crude oil inventory data on Wednesday. Traders are optimistic that U.S. oil and gasoline inventories will show a sustained decline, signaling an uptick in demand following a slow start to summer fuel consumption. For the week ending June 28, U.S. oil inventories fell by 12.2 million barrels, and gasoline stocks declined by 2.2 million barrels, offering a potentially bullish sign for the market.
Macquarie forecasts a smaller drop in oil inventories, predicting a reduction of 1.2 million barrels last week, suggesting the total balance is "only modestly tighter than we had anticipated," according to a Monday note.
Meanwhile, oil prices edged lower as the market's focus turned from the storm's aftermath to broader economic factors. Brent crude slipped towards $85 a barrel after shedding almost 2% in the previous two sessions, while WTI hovered near $82. With recovery efforts underway in Texas, some infrastructure, including the Port of Houston and the Explorer Pipeline, remains offline, and about 85% of Houston has lost power.
Adding to the market dynamics, Russia's weekly crude exports saw the most significant slump since before its 2022 invasion of Ukraine, with shipments falling from major ports without a clear reason. This reduction, combined with ongoing OPEC+ supply cuts and expectations of potential Federal Reserve interest rate cuts, continues to support crude prices.
Federal Reserve Chair Jerome Powell's upcoming two-day testimony on monetary policy is anticipated to offer insights into the future path of borrowing costs. Investors are looking for hints on whether the Fed will lower interest rates, which could further influence market sentiment.
Forecasts for increased fuel consumption throughout the Northern Hemisphere's summer have bolstered prices, although concerns about Chinese consumption persist, reflected in slumping supertanker earnings. The Energy Information Administration's Short-Term Energy Outlook, to be released later Tuesday, will provide further market insights.
"Both crude and liquids balances are expected to remain tight in the second half of 2024, leading to significant stock draws," said Claudio Galimberti, global market analysis director at Rystad Energy. "Hurricane Beryl caused extensive power outages in Houston and shipping delays. However, so far, it has had a limited impact on production and refining assets."
