Oil prices jump US$1 on Gulf Coast storm, post selloff recovery

OIL futures jumped by a dollar in early trading on Monday as a potential hurricane system approached the US Gulf Coast, and as markets recovered from a selloff following weaker-than-expected US jobs data on Friday.

West Texas Intermediate crude futures rose US$1, or 1.48 per cent, to US$68.67 a barrel by 0146 GMT. Brent crude futures were up 99 cents, or 1.39 per cent, at US$72.05 a barrel.

Analysts said the bounce was in part a reaction to a potential hurricane in the US Gulf Coast.

A weather system in the southwestern Gulf of Mexico is forecast to become a hurricane before it reaches the northwestern US Gulf Coast, the US National Hurricane Centre said on Sunday. The US Gulf Coast accounts for some 60 per cent of US refining capacity.

“Sentiment recovered somewhat from last week’s selloff,” said independent market analyst Tina Teng.

At the Friday close, Brent had dropped 10 per cent on the week to the lowest level since December 2021, while WTI fell 8 per cent to its lowest close since June 2023.

“Crude oil recorded its biggest weekly fall in 11 months amid a darkening economic backdrop. Weak jobs data in the US on Friday raised concerns over flagging oil demand in the world’s biggest consumer,” ANZ analysts wrote in a client note.

A highly anticipated US government jobs report showed nonfarm payrolls increased less than market watchers had expected in August, rising by 142,000, and the July figure was downwardly revised to an increase of 89,000, which was the smallest gain since an outright decline in December 2020.

A decline in the jobless rate points to the Federal Reserve cutting interest rates by just 25 basis points this month rather than a half-point rate cut, analysts said.

Lower interest rates typically increase oil demand by spurring economic growth and making oil cheaper for holders of non-dollar currencies.

But weak demand continued to cap price gains.

Refining margins in Asia have slipped to their lowest seasonal levels since 2020 on weak demand from the two largest economies. Fuel oil exports to the US Gulf Coast fell to the lowest level since January 2019 last month on weaker refining margins. REUTERS