Oil prices edged lower on Monday on concerns that Hurricane Irma’s pounding of heavily populated areas of Florida could dent oil demand in the world’s top oil consuming nation.
Losses were capped by weekend talks between Saudi Arabia’s oil minister and counterparts over a possible extension to a pact to cut global oil supplies beyond next March.
Brent crude oil futures for November delivery LCOc1 were down 31 cents at $53.47 a barrel while benchmark U.S. West Texas intermediate crude CLc1 advanced by 22 cents to $47.70 a barrel.
Hurricane Irma knocked out power to nearly 5.8 million Florida homes and businesses on Sunday after millions were told to evacuate ahead of the storm.
“We believe that Irma will have a negative impact on oil demand but not on oil production or processing,” Goldman Sachs analysts said in a note.
Irma is forecast to weaken to a tropical storm over northern Florida or southern Georgia later on Monday.
It comes on the heels of Hurricane Harvey, which struck the U.S. oil hub of Texas two weeks ago, knocking out a quarter of the nation’s refineries, many of which are now restarting operations.
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 around 300,000 bpd, Goldman said.
The longer-term focus, however, was on discussions over a possible extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries (OPEC)and non-OPEC producers including Russia and Kazakhstan. The deal aims to curb an oil supply glut that has weighed on crude prices for more than three years.
The deal agreed late last year to reduce output by about 1.8 million bpd until March 2018 helped to keep prices as high as $58 a barrel in January, but they have since sagged as global stocks have not fallen as quickly as expected.
Saudi Arabia’s Energy Minister Khalid al-Falih met his Venezuelan and Kazakh counterparts at the weekend to discuss an extension of the deal by at least three months, the Saudi energy ministry said.
On Monday, Falih and his United Arab Emirates counterpart also agreed to consider an extension beyond March 2018.
“We have a game in communications here that is starting early. This is simply moral suasion and I suspect more formal commitments one way or the other at the November OPEC meeting,” Harry Tchilinguirian, global head of commodity markets research strategy at BNP Paribas told the Reuters Global Oil Forum.
Venezuela Energy Minister Eulogio del Pino said on Friday that global oil inventories remain too high and urged producers to look at exemptions granted to countries such as Libya and Nigeria and their effect on the market.