Gulf of Mexico supply cuts help lift crude oil from nine-month low

Data analyzing in commodities energy market: the charts and quotes on display. US WTI crude oil price analysis. Stunning price drop for the last 20 years.

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Energy stocks outperformed the broader market Tuesday as U.S. crude oil prices rebounded a day after settling at their lowest since January, supported by a slowdown in oil production in the U.S. Gulf of Mexico ahead of Hurricane Ian and a slight softening in the U.S. dollar.

Front-month Nymex crude (CL1:COM) for November delivery closed +2.3% to $78.50/bbl, while Brent crude (CO1:COM) for November delivery ended +2.6% to $86.27/bbl.


Among individual stocks, refiners Marathon Petroleum (MPC), Valero Energy (VLO) and Phillips 66 (PSX) all cracked the S&P 500's top 15 gainers, +3.7%, +3.3% and +2.8%, respectively.

Other noteworthy gainers included (NYSE:CVI) +9.5%, (PBF) +8.3%, (DK) +7.3%.

Hurricane Ian's projected path takes it east of most U.S. oil and gas production in the Gulf, but so far it has caused production shut-ins of 190K bbl/day of oil, or 11% of total Gulf of Mexico oil output, and 184M cf/day of gas, or 8.5% of overall GoM output.

The U.S. Gulf of Mexico produces ~15% of the country's crude oil and 5% of dry natural gas.

Oil's recent price drop has raised speculation that OPEC+ could intervene, and Russia reportedly is pushing for a production cut.

"Only a production cut by OPEC+ can break the negative momentum in the short run," UBS oil analysts Giovanni Staunovo and Wayne Gordon said.

Goldman Sachs cut its oil price forecast by $19/bbl on average for the period stretching from Q4 to next year's Q4.

"Even with a cautious growth outlook... the oil market remains critically tight, with still near-record low inventories and OPEC spare capacity and with supply soon set to turn supportive once again between the end of the U.S. [Strategic Petroleum Reserve] sale and the expected decline in Russian production later this year," Goldman said.

Meanwhile, front-month U.S. natural gas (NG1:COM) closed -3.6% to $6.65/MMBtu, the lowest closing price since July 14.

European authorities began investigations of mysterious leaks on two currently closed Russian natural gas pipelines to Germany, pushing European gas futures higher.

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