Oil prices surged by over a dollar per barrel on Tuesday as the U.S. dollar weakened, and investors assessed Hurricane Idalia’s potential impact on energy supply and demand.
Brent crude futures climbed $1.11, or 1.3%, settling at $85.53 a barrel, while U.S. West Texas Intermediate futures rose $1.14, or 1.4%, to $81.24 a barrel.
The U.S. dollar index fell on Tuesday after data showed a decrease in U.S. job openings in July. Analysts suggest that a softer labor market might prompt the Federal Reserve to ease its interest rate hikes.
A weaker dollar makes dollar-denominated oil cheaper for investors using other currencies, boosting demand.
Hurricane Idalia threatens fuel distribution ahead of Labor Day holiday, analysts warn.Hurricane Idalia, predicted to reach Category 3 strength with winds of at least 111 mph (179 kph), is expected to hit Florida’s Gulf Coast early Wednesday, according to the National Hurricane Center (NHC).
The storm could disrupt fuel distribution and consumption in the affected areas, particularly before the Labor Day holiday on September 4, noted Mizuho analyst Robert Yawger.
Though Idalia isn’t expected to impact major oil-producing platforms in the U.S. Gulf of Mexico, Chevron Corp evacuated some staff from three platforms, though production continued at its Gulf of Mexico facilities.
Yawger highlighted the increased risk of potential future outages in the Gulf due to an anticipated busy hurricane season.
UBS analyst Giovanni Staunovo pointed out that expectations of a significant decline in U.S. crude oil stockpiles have also driven up oil prices.
A Reuters poll predicted a 3.3-million-barrel drop in U.S. crude inventories for the latest week. The American Petroleum Institute was set to release crude stock estimates late Tuesday, with official government figures following on Wednesday.
Further contributing to supply concerns, Baker Hughes reported that the U.S. oil rig count, an early indicator of future production, fell in August for the ninth consecutive month.
Price Futures Group analyst Phil Flynn remarked that despite potential demand destruction from Hurricane Idalia, an impending crude oil supply squeeze is becoming more evident.