Oil edges up as OPEC output falls, offsets hurricane concerns

Oil edges up as OPEC output falls, offsets hurricane concerns

Oil edges up as OPEC output falls, offsets hurricane concerns

US crude settled up more than 1% on Monday, paring some of its huge discount to global oil benchmark Brent, as Hurricane Irma's initial damage on the domestic oil industry look more contained than thought.

The hurricane knocked out power to almost 4 million homes and businesses in Florida on Sunday.

Irma hit Florida on Sunday morning as a unsafe Category 4 storm, the second highest level on the five-step Saffir-Simpson scale, but by afternoon it weakened to a Category 2 with maximum sustained winds of 110 miles per hour (177 kph).

"For U.S. shale producers ... when it's $45, no-one is really happy, but you get to $50 and they're willing to hedge their production so there's a question of "is this a cap on near-term prices"?" she added, referring to a West Texas Intermediate price of $50 as the "iceberg of U.S. production".

In its monthly oil report, the Organization of the Exporting Countries said its production fell for the first time since April in a sign that its efforts to rein in the global supply glut are starting to pay off. OPEC said Tuesday that its output edged lower by 0.24% to 32.76 million barrels a day in August.

OPEC continues to grapple with oversupply owing to a ramp up of production in Nigeria and Libya - the two OPEC members exempt from the oil cut deal agreed by OPEC and non-OPEC producers in late 2016.

The latest inventories data will come back into focus with the API data due for release after Tuesday's NY close with the latest EIA data on Wednesday.

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"The oil market reacted to the Saudi talks", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting told Reuters.

OPEC said inventories were falling and that an increase premium of Brent crude for immediate delivery over that for later supplies raised hopes that a rebalancing is under way.

A Reuters poll of six analysts taken ahead of inventory reports forecast that crude stocks likely rose by 2.3 million barrels in the week ended September 8.

The two hurricanes are expected to inflict a "bearish shock" on oil balances in September, denting global demand by 900,000 barrels per day (bpd) and supply by about 300,000 bpd, Goldman said.

North Korea is not at the center of the oil market - the country produces nearly no crude oil, has two barely functioning refineries and is believed to import a tiny volume of around 15,000 b/d of crude oil and some refined products from China.

The hurricanes have rattled energy markets, with Irma shutting Florida fuel stations and ports and Harvey earlier halting about one-quarter of the nation's refining capacity.

A further extension for at least three more months beyond March is now being discussed before Opec meets again in November.

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