Oil holds near five-month high as U.S. braces for hurricane, but virus concerns weigh

A Marathon oil refinery stands in Louisiana, La. Gulf Coast.
Patrick Semansky | Bloomberg | Getty Images

Oil prices steadied on Wednesday, pressured by worries about the demand outlook during the coronavirus pandemic but buoyed as U.S. producers shut output in the Gulf of Mexico ahead of Hurricane Laura.

Renewed worries over the COVID-19 pandemic, which has squeezed demand and sent prices to record lows in April, dampened market sentiment after reports this week of patients being re-infected, raising concerns about future immunity.

Brent crude fell 22 cents to $45.64 a barrel, while West Texas Intermediate crude settled 4 cents higher at $43.39 per barrel. Both benchmarks settled at a five-month high on Tuesday.

The U.S. energy industry was preparing for Hurricane Laura, expected to make landfall along the Gulf Coast late Wednesday or early Thursday. Nine oil-processing plants that convert nearly 2.9 million barrels per day of oil into fuel, and account for about 15% of U.S. processing, were shutting down.

Oil producers on Tuesday had evacuated 310 offshore oil facilities and shut 1.56 million barrels per day (bpd) of crude output, 84% of Gulf of Mexico's offshore production.

"Oil traders will be preoccupied with the hurricane today," said Tamas Varga of broker PVM. "Once the danger passes, demand considerations will come into focus again."

Ahead of the storm, crude exports last week rose by the most since February 2019 to nearly 3.4 million barrels per day, U.S. Energy Information Administration data showed on Wednesday.

"These guys are aware that the storm is on the way and they will try to get as much crude oil out of here as fast as they can," said Bob Yawger, director of energy futures at Mizuho.

Meanwhile, U.S. crude inventories fell by 4.7 million barrels in the week to Aug. 21, compared with analysts' expectations for a decrease of 3.7 million barrels, EIA said.