Oil Prices Edge Lower; Tropical Storm Impact Not as Strong as Expected

Investing.com – Oil prices edged lower on Wednesday as a tropical storm that was expected to cause supply disruptions in the oil-rich Gulf area was not as strong as expected.

West Texas for October delivery was down 0.7% to $69.38 a barrel as of 12:01 AM ET (04:01 GMT). Meanwhile for November delivery, the benchmark for oil prices outside the U.S., slipped 0.3% to $77.92. 

Oil prices made a bright start to the session after reports that two Gulf of Mexico oil producers took precautionary measures ahead of the arrival of Tropical Storm Gordon.

The storm threatens oil production and refinery activity in the Gulf area, which makes up about one-sixth of U.S. oil production and 45% of its refining capacity.

Prices then reversed its gains however as the impact of the tropical storm was not as strong as initially expected. The storm reportedly shifted eastward and reduced its threat to producers in most Gulf Coast refineries.

Elsewhere, the upcoming U.S. sanctions on Iran would continue to affect outlook of oil prices this year, according to analysts.

“With the anticipation of up to 1.5 million barrels per day affected by the U.S. sanctions on Iran, one would expect prices to move higher in the weeks ahead,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA.

Innes then noted he believed price outlook for crude remains bullish largely due to the upcoming U.S. sanctions targeting Iran’s oil sector from November.

Worries over emerging markets also weighed on market sentiments, according to Greg McKenna, chief market strategist at futures brokerage AxiTrader.

“My sense is that the big issue going forward, if this emerging market crisis morphs into something more troubling, is not just (oil) demand growth but total demand,” he said, adding that emerging markets are a key driver of global oil demand growth.

“If emerging markets get worse … that will impact crude markets,” he added.

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