Oil Prices Up Most in Nearly 3 Weeks Amid Concerns Over Hurricane Ian Damages

NEW YORK (Sputnik) - Oil prices had their first biggest gain in nearly three weeks on Tuesday, with benchmark crude futures rising more than 2% on concerns about potential damage to offshore US energy production facilities from the start of the Atlantic hurricane season.

Fears that Hurricane Ian might pulverize US oil producing platforms along the Gulf Coast prompted oil super-majors Chevron and BP to evacuate their facilities there, triggering the biggest rally in crude since September 9.

New York-traded West Texas Intermediate, which serves as the US crude benchmark, settled at $78.50 a barrel, up $1.79, or 2.3%, on the day.

Brent, the London-traded global benchmark for oil, settled at $86.27, up $2.21, or 2.6%, on the day.

Prior to Tuesday, crude prices had experienced a torrid selloff from the combination of super-sized rate hikes by the Federal Reserve, recession worries and the dollar at 20-year highs. A strong dollar is anathema to commodities priced in the currency, including crude, as it raises transaction/acquisition costs for commodity traders using the euro and other currencies.

Oil prices still came off Tuesday’s highs after Federal Reserve Bank of St. Louis President James Bullard cautioned that the United States remained at the risk of a recession from its worst inflation in over 40 years.

"No matter how you look at it, we have a serious inflation problem in the US," Bullard said in a speech delivered virtually to an economic event in London. "We're missing our inflation target and the credibility of our inflation targeting regime is at risk."

Federal reserve Bank of Minneapolis President Neel Kashkari, meanwhile, said "there's a lot of tightening in the pipeline" - referring to rates already up by 300 percentage points and likely to rise another 125 before year-end. "We are moving at an appropriately quick pace," Kashkari, adding that "there is a danger of overdoing it."

Their comments pushed the mercurial dollar back into positive territory after it had been lower for most of Tuesday morning. The stock market, up earlier in the day, also tanked, after the litany of comments from Bullard, Kashkari and other regional Fed chiefs. Wall Street’s three major stocks indicators - the Dow, the S&P 500 and Nasdaq - are all down about 20% or more for 2022, placing them in bear-market category.

"Crude prices are attempting to stabilize alongside most risky assets as the global recession fear-driven selloff is slowly getting fully priced in," said Ed Moya, analyst at online trading platform OANDA. "The oil market could see another drop if risk aversion quickly returns, [although] the current tightness should prevent a drop below the mid-$70s."

Notwithstanding Tuesday’s advance, WTI is down 40% from its March high of around $130, which had come a fortnight after the breakout of the Russia-Ukraine war.

The US crude benchmark remained almost 40% lower from its March highs of around $130. It was also down more than 12% on the month and 26% off for the July-through-September period, marking its first quarterly decline in two years.

Brent, meanwhile, remains some 38% off from its March peak of almost $140. It is also 10% lower on the month, and off 25% for the third quarter.