Oil rises as storm halts output while IEA warns of supply crunch

Crude rose as storm Michael strengthened and shut some US oil output, while the International Energy Agency (IEA) called on producers to pump more as the market is “entering the red zone.”

Futures in New York rose 0.6%. Michael, currently a category 1 storm, is strengthening as it heads toward Florida after shutting about 19% of oil production in the Gulf of Mexico. The IEA’s Executive Director Fatih Birol urged crude producers in the Middle East and elsewhere do more in order to avoid a “ challenging” end to the year.

Crude has gained more than 20% this year as sanctions on Iran, Venezuela’s slumping oil industry and pipeline bottlenecks in the biggest US shale regions crimp supply. That’s currently surpassing concerns that surging prices could reduce consumption in some countries, adding to demand risks as America and China trade tensions continue to flare.

“The oil market mood is exceptionally bullish, with fears growing that the US demands for an Iran oil embargo could cause a significant supply shortfall,” said Carsten Menke, an analyst at Bank Julius Baer & Co.

Prices rise

West Texas Intermediate for November delivery was 47 cents higher at $74.76 a barrel on the New York Mercantile Exchange at 12:09. The contract lost 5c to $74.29 a barrel on Monday. Total volume traded Tuesday was in line with the 100-day average.

Brent for December settlement added 76c at $84.67 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $10.03 premium to WTI for the same month.

The IEA’s Birol made a direct appeal to the Organisation of Petroleum Exporting Countries and other major oil producers to boost production. He has welcomed efforts by Saudi Arabia to increase output, but believes market tightness is likely to persist.

“Demand is still very strong, and we’ve been losing oil from Venezuela in big amounts, and also Iran is going down,” Birol said in a Bloomberg TV interview.