Crude oil prices moved higher earlier today on anticipation that tropical storm Francine would disrupt oil and gas production in the Gulf of Mexico.
News that Exxon was reportedly cutting production rates at its refinery in Baton Rouge, Louisiana, helped prices move higher.
Reuters reported on Tuesday, citing unnamed sources, that Exxon planned to slash production at the 522,500-bpd facility to just 20% of capacity ahead of Francine's landfall. "We're closely monitoring and preparing for severe weather that may impact our Baton Rouge operations," an Exxon spokeswoman told Reuters. "Our primary focus is the safety of our workforce and communities in the affected areas. We continue to meet customer commitments."
Earlier in the week, media reported that field operators in the Gulf were evacuating crews from offshore platforms ahead of the storm. Chevron, Shell, and Exxon were among the companies that paused work on some platforms in anticipation of the storm.
According to the latest update, Francine has strengthened to a Category 1 hurricane and will make landfall in Louisiana later today.
Yet storm activity in the Gulf of Mexico was not the only reason oil prices moved higher, according to some analysts.
"Investors adjusted their positions after Tuesday's sharp drop," Nissan Securities analyst Hiroyuki Kikukawa told Reuters.
The sharp drop was largely caused by an OPEC update on oil demand, in which the cartel said it now expects more sluggish growth than previously forecast. This was the second downward revision of demand projections by OPEC, which now sees 2024 demand growth at 2.03 million barrels daily. That's down from 2.11 million bpd in its previous monthly report, and 2.25 million bpd in earlier projections.
The group also revised down its demand growth forecast for 2025, to 1.74 million barrels daily, from 1.78 million bpd in last month's oil market report.
These updates tempered any supply disruption concerns on Tuesday but now that Francine is approaching the Gulf Coast, these appear to have been reignited, pushing prices higher.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More