Oil slips as Hurricane Ida recedes

Colonial Pipeline activity restarts

Oil prices dipped on Tuesday as the uncertainty surrounding the impact of Hurricane Ida receded and anxiety over the state of Chinese fuel demand returned. 

The fifth-strongest hurricane ever to hit the US mainland made landfall on Sunday, the 16th anniversary of Hurricane Katrina in which over 1,800 people died. 

Although only two people are currently thought to have died as a result of Ida, the weather event has nonetheless caused significant devastation and disruption. Around one million Louisiana locals are thought to be without power. 

In the run-up to the hurricane, which has since been downgraded to a tropical depression, oil companies rushed to evacuate personnel from platforms in the Gulf of Mexico and shuttered refinery activity. 

Production severely limited

According to the latest data from the Bureau of Safety and Environmental Enforcement on Monday, personnel had been evacuated from 51.4% of the Gulf’s manned platforms and 100% of its 11 non-dynamically positioned rigs. 

The BSEE added that around 94.6% of the current oil production in the Gulf of Mexico has been shut in, as has 93.5% of gasoline production.  

Colonial Pipeline activity restarts

Tuesday saw the first signs of a return to normality within the energy sector when Colonial Pipeline announced it had restarted its main distillate and gasoline lines. The largest pipeline in the US, which services much of the east coast, had been shut as a safety precaution. 

While US uncertainty eased, in China, fuel demand anxiety continued. Although some have pointed to the recent easing of restrictions imposed to limit the spread of the Delta variant as a cause for optimism, others have argued that the nation’s economic recovery is fundamentally fragile. 

On Tuesday, China’s National Bureau of Statistics posted a surprise slump in the country’s non-manufacturing PMI. the metric fell to 47.5, its second-lowest level on record. Furthermore, manufacturing PMI slipped to 50.1, within touching distance of stagnation. 

By mid-afternoon, spot Brent and US crude traded down by 0.7% and 0.9% at $71.59 and $68.46 per barrel, respectively. 

Brent Crude Oil Spot
Daily change
83.26
Low: 81.67
High: 83.29

Further reading: Oil extends gains as storm looms over Gulf of Mexico

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