The continuing fallout from Hurricane Ida and reports of large decreases in U.S. inventories of commodities caused wild swings in oil prices on Thursday.

Ida made landfall as a Category 4 hurricane in Louisiana on Aug. 29, but has continued to stifle production and refining along the U.S. Gulf Coast. Federal estimates show about 77 percent of the total crude oil and natural gas production from U.S. territorial waters remains offline more than a week after the storm.

In its weekly update, the U.S. Energy Information Administration reported that total commercial crude oil inventories declined by 1.5 million barrels from the previous week and remain about 6 percent below the five-year range.

Much of the production from the Gulf of Mexico remains offline more than week after Hurricane Ida made landfall. (Wikimedia Commons)

Gasoline inventories, meanwhile, declined by 7.2 million barrels and are about 4 percent below the five-year average for this time of year.

Decreases are usually indicative of strength in demand, but the lingering impacts from Ida continue to skew the data.

“There’s no doubt that Hurricane Ida has played havoc with these numbers,” Phil Flynn, an energy analyst at The PRICE Futures Group in Chicago, told Zenger.

Crude oil prices, however, spent most of the day in negative territory, with West Texas Intermediate, the U.S. benchmark for the price of oil, declining more than 2 percent on the day to close at $67.91 a barrel.

Giovanni Staunovo, a commodities analyst at Swiss investment bank UBS, told Zenger that Ida certainly created a lot of noise in the data, though crude oil inventories declined less than expected. Last week’s data showed crude oil inventories fell by 7.2 million barrels from the week prior.

He told Zenger his review of data shows inventories may come close to lows not seen since before the pandemic.

Ida, meanwhile, is rivaling Hurricane Katrina in terms of production losses.

Al Salazar, the vice president of intelligence at energy analytics firm Enverus, said a situation like this would normally send crude oil prices sharply higher, but had not this time.

President Biden’s decision to tap into the Strategic Petroleum Reserve helped keep crude oil prices in check, analysts said. (Wikimedia Commons)

Broader market conditions have prevented that, he said.

The Organization of the Petroleum Exporting Countries and their allies have been putting more barrels of oil onto the market and President Joseph R. Biden Jr. also recently tapped into U.S. strategic oil reserves. Meanwhile, the economic strains from the COVID-19 pandemic have been keeping a lid on crude oil prices.

“Those with more bullish aspirations for oil prices in the fourth quarter are likely increasingly frustrated in that if Ida can’t get you higher prices, what can?” Salazar said.

Edited by Bryan Wilkes and Alex Willemyns

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