U.S. benchmark West Texas Intermediate crude climbed 0.7% today to close at $74.81 a barrel. International benchmark Brent crude rose 1.23% to $84.94 a barrel.
The International Energy Agency warned of what it termed a “risky situation; the oil markets are entering the red zone,” according to IEA Executive Director Fatih Birol. “Expensive energy is back at a bad time, when the global economy is losing momentum. We really need more oil.”
The agency appealed to OPEC nations and Russia to pump more oil to make up for plunging production from Venezuela and falling exports from Iran as U.S. sanctions close parts of the market to oil from that country. Saudi Arabia and Russia have increased production to record levels but it’s not clear to the market that the countries can fill the shortfall. Or at least not quickly enough to prevent further price increases.
At the same time oil producers in the Gulf of Mexico have begun evacuating workers and shutting production ahead of Hurricane Michael, which is gaining strength as it moves toward the Florida Panhandle. Winds are now forecast to exceed 110 miles an hour with landfall expected near Panama City on Wednesday.
The storm has already cut oil production in the Gulf of Mexico by 40% and natural gas output by 28%.
Oil stocks were up on the news on oil prices. Equinor (EQNR), Norway’s state-controlled oil company and a producer very exposed to the price of Brent crude, closed up 2.77% to $28.23. U.S. oil shale producers in the Permian Basin also climbed with Pioneer Natural Resources (PXD) up 3.34% to $187.92 and Diamondback Energy (FANG) gaining 1.69% to $135.13. All three of those stocks are members of my various portfolios (including my Volatility Portfolio on my subscription sites, JubakAM.com and JugglingWithKnives.com.)