By Geoffrey Smith
Investing.com -- Crude oil prices were higher by mid-morning in New York on Monday as risk assets in general rose in response to evidence of a continued fall in coronavirus cases in the U.S. Fears of an extended shortfall in supply due to the incipient hurricane season also supported product prices in particular.
Data at the weekend from Johns Hopkins showed the number of new Covid-19 infections fell to its lowest level in two months on Sunday, at only 34,567. Infections had peaked in late June at over twice that level.
By 10:45 AM ET (1445 GMT), U.S. crude futures were up 0.9% at $42.73 a barrel, while the international benchmark Brent was up 1.3% at $45.50 a barrel.
Over the weekend, producers in the Gulf of Mexico had shut in over 1 million barrels a day of oil production as the twin threats of Hurricane Marco and Tropical Storm Laura approached.
However, there has been little sign of the market tightening as a result, since the same storms are also threatening refineries’ ability to run. Motiva, the Saudi Aramco (SE:2222) subsidiary that owns the biggest crude refinery in the U.S. at Port Arthur in Texas, may shut the refinery later this week, Reuters reported.
Port Arthur is capable of processing over 600,000 barrels of oil a day. It was shut down nearly completely for two whole weeks in 2017 as a result of flooding from Hurricane Harvey.
Such tightness as there has been was consequently in refined products, where buyers rushed to protect themselves against a possible shortfall in supplies later in the week.
Gasoline RBOB prices surged 4.8% to $1.3435 a gallon, their highest in nearly six months.
"Bad weather news is good news for bullish market participants and a forced production decline in the Gulf of Mexico these days is exactly what traders needed to drive prices a bit higher," said Rystad Energy's head of oil market analysis Bjornar Tonhaugen in emailed comments. "Normally, such weather phenomena could have an even wider impact on prices, but Covid-19 concerns are making price moves a bit more careful."
The National Hurricane Center warned that while Marco had weakened to a tropical storm overnight, it still posed a threat to parts of the Gulf Coast. Tropical Storm Laura is still located over Cuba and not expected to make landfall on the U.S. until later in the week, if at all.
Elsewhere, the slim chance of a quick return of Libyan crude oil to world markets effectively vanished on Monday as the Libyan National Army under warlord Khalifa Haftar rejected a ceasefire proposal from the UN-backed Government of National Accord.
Haftar’s forces had initially been non-committal about the proposal last week, sparking hopes of an end to the 16-month battle for control of the Libyan capital, Tripoli.