Oil prices increased on Tuesday due to concerns over oil supply disruptions in the US Gulf of Mexico after a new tropical storm gathered strength and threatens oil production in the region.
International benchmark Brent crude was trading at $74.03 per barrel at 0554 GMT for a 0.71% increase after closing Monday at $73.51 a barrel.
American benchmark West Texas Intermediate (WTI) was at $71 per barrel at the same time for a 0.78% rise after it ended the previous session at $70.45 a barrel.
As production in the Gulf of Mexico is still partially shut due to Hurricane Ida that hit the area two weeks ago, a new tropical storm, Nicholas, threatens to bring flash flooding and a storm surge to coastal Texas and Louisiana, both of which are still recovering from the effects of Hurricane Ida.
Upgraded to a hurricane on Monday, Tropical Storm Nicholas caused offshore US Gulf of Mexico oil platforms and onshore oil refiners to start evacuations and pushed prices to six-week highs.
According to the US Bureau of Safety and Environmental Enforcement, 48% of current oil production and 54% of natural gas production in the Gulf of Mexico has been shut in after Hurricane Ida hit the area two weeks ago.
With the potential demand rebound in the area after the hurricane, the refineries managed to quickly restart oil production compared to previous storms. Most of the nine Louisiana refineries affected by the storm had resumed production on Friday.
However, investors expect the price hike to be short-lived after the US and China announced potential supply increases from planned releases of oil from strategic reserves.
Following Hurricane Ida, the US Department of Energy opened its emergency reserve to eight companies, including Exxon, Chevron and Valero in order to mitigate disruptions following emergencies.
China last week also announced that it would release crude oil reserves to the market via public auction. Earlier on Monday, China said details of planned crude oil sales would be announced in due course.
Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) in its monthly report on Monday stressed that the increased risk of COVID-19 cases primarily fueled by the Delta variant is clouding oil demand prospects for the final quarter of the year.
The group kept its global oil demand forecast for 2021 unchanged while predicting a 4.15 million-barrel rise for 2022.
By Ebru Sengul Cevrioglu