Oil pares gains from 2-month high mark after Hurrican Beryl forecast spares crude production areas; Brent at $86

Crude oil prices gave up most of their gains from earlier in the day as Hurricane Beryl's forecast track continued to steer it away from major offshore production areas in the US-regulated northern Gulf of Mexico. The storm is reported to be a dangerous Category five hurricane which is tearing through the Caribbean Sea. 

Brent crude futures last gained 24 cents, or 0.28 per cent, to $86.84 per barrel. US West Texas Intermediate or WTI crude was last up five cents, or 0.06 per cent, at $83.23. Earlier on Monday, WTI rose $1 TO $84.38 a barrel on fears Beryl might have a wider impact in the Gulf of Mexico as US demand for motor fuels is increasing. Both benchmarks gained about two per cent in the previous session.

What's affecting crude oil prices?

-As new forecasts emerged on Monday, traders were less fearful of supply problems. Markets came to the realization that Hurricane Beryl is not going to shut down any major amounts of offshore oil production, as per analysts.

-The Huuricane is expected to have weakened into a tropical storm by the time it enters the Gulf of Mexico late this week, according to the US National Hurricane Center. US gasoline demand is expected to ramp up as the summer travel season picks up with the Independence Day holiday this week. 

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Where are prices headed?

Analysts said that crude oil gained in a highly volatile session, with WTI prices surging to 10-week highs at the start of the week in the international markets amid supply worries and demand hopes. The escalating tensions between Israel and Lebanon-based Hezbollah have heightened concerns in the global oil markets. 

Hurricane Beryl made landfall on Carriacou Island in the Caribbean as a category 4 storm, raising concern that such a severe system this early in the year may portend a serious hurricane season, which is still months away from its typical peak, according to Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.

OPEC’s crude production remained steady for a third month, while some key members continued to pump above agreed limits. The cartel pumped an average of 26.98 mbpd in June, or 80,000 bpd less than May. Oil prices might remain buoyed on supply concerns in the event of an escalation in the war, as per Chainwala.

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A potential conflict could disrupt global oil supplies in the coming months. Also, the US summer peak driving season is bolstering crude oil prices. The market is also factoring in a premium due to the hurricane season in US.

‘’The strength of the dollar index, rising US bond yields, and downbeat US manufacturing activity data could limit gains in crude oil. We expect crude oil prices to remain volatile. Crude oil has support at $82.20-81.50 and resistance at $83.70-84.25. In INR, crude oil has support at ₹6,870-6,810 and resistance at ₹7,040-7,110,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.