Oil prices rise as markets brace for U.S. Gulf coast supply disruptions

Oil prices surged on Thursday as investors anticipated potential supply disruptions stemming from severe weather in the U.S. Gulf coast and ongoing tensions in the Middle East. Despite a pledge by the International Energy Agency to release additional stockpiled oil, the price jump was tempered by this announcement. Brent oil futures for December increased by 0.9% to $101.10 a barrel, while West Texas Intermediate crude futures for November rose 0.9% to $89.08 a barrel.

The primary driver behind the price increase was the forecasted intensification of Tropical Storm Isaias into a major hurricane. This storm was expected to make landfall along the northern Gulf coast, potentially causing significant rainfall and hurricane-force winds. Several major oil and gas companies, including BP, Chevron, and Shell, were evacuating non-essential personnel from their offshore facilities in the region due to the storm's threat.

Projections indicated that the storm could lead to the loss of up to 11.2 million barrels of oil production across the Gulf. Reuters reported that a model estimated this loss. U.S. crude oil inventories also declined by 3.2 million barrels over the week to October 2, a figure that fell short of expectations for an increase.

However, the IEA's announcement to release up to 400 million barrels of oil stockpiles, as soon as possible, did offer some relief. This move could inject around 100 million barrels into the market, potentially alleviating supply concerns. Nevertheless, the IEA's move was not definitive, and the extent of the release remained unclear.

Meanwhile, recent data from the UK Maritime Trade Operations indicated a rise in Iranian attacks on ships passing through the Strait of Hormuz. The unrest in the Middle East, exacerbated by ongoing hostilities between Saudi Arabia and Yemen's Iran-backed Houthis, kept markets on edge over possible further supply disruptions. Despite these concerns, Middle East supplies had shown signs of improvement in September, with oil flows through the Strait of Hormuz briefly exceeding pre-war levels.