Market Analysis

Oil prices increased by over 1% on Thursday, continuing their rebound driven by concerns over Hurricane Francine's effect on U.S. oil production. However, a weak demand outlook limited further gains.

By 0805 GMT, Brent crude futures for November had climbed by $1.01, or 1.4%, reaching $71.62 a barrel. U.S. crude futures for October were up $1, or 1.5%, at $68.31.

Both contracts had surged by more than 2% in the previous session due to disruptions caused by Hurricane Francine, which made landfall in southern Louisiana on Wednesday. This led to the shutdown of offshore platforms in the U.S. Gulf of Mexico and interruptions in refinery operations along the coast.

On Wednesday, the offshore regulator reported that nearly 39% of U.S. Gulf oil and almost half of its natural gas production were offline. A total of 171 production platforms and three rigs had been evacuated.

"The region contributes around 15% of U.S. oil production, so any disruptions here could tighten supply in the short term," said Priyanka Sachdeva, a senior market analyst at Phillip Nova, based in Singapore.

As the storm is expected to weaken after landfall, attention in the oil market has shifted to concerns about lower demand.

"The effect of this supply disruption may be short-lived as the storm dissipates and normal weather returns. The bigger question is whether demand issues will continue," noted Charalampos Pissouros from brokerage XM.

Recent data from the Energy Information Administration (EIA) revealed an increase in U.S. oil stockpiles due to rising crude imports and declining exports. Gasoline demand in the U.S., the world's largest oil consumer, fell to its lowest level since May, and both distillate fuel demand and refinery runs also decreased.

Despite the short-term disruptions from Hurricane Francine, the medium-term outlook for WTI crude remains bearish, influenced by weak demand from China and "growth scare concerns" in the U.S., according to Kelvin Wong, senior market analyst at OANDA.

Earlier this week, the Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for global oil demand growth for this year and cut its 2025 projections, marking its second consecutive downward revision. This revision led to a significant drop in both oil benchmarks on Tuesday.

Paraphrasing text from "Reuters" all rights reserved by the original author.