Harry Tchilinguirian, global head of commodity markets at BNP Paribas, said the market was still determining the extent of the damage of Hurricane Harvey on oil refineries, while anticipating the effect of Hurricane Irma, which made landfall in the us over the weekend.
Irma, the second major storm in the US region in a fortnight, made landfall in Florida on Sunday as a Category 4 hurricane, knocking out power to almost 5.8 million homes and businesses in the state.
Hurricane Harvey, the storm that struck Texas more than two weeks ago, will remain a bigger concern for the oil market than Hurricane Irma which weakened Monday to a tropical storm, Goldman Sachs said.
The front-month contract in USA crude's West Texas Intermediate (WTI) benchmark settled up $0.59, or 1.2%, at $48.07 per barrel on the New York Mercantile Exchange.
Spot gold is down 0.8 per cent at $1,335.10 an ounce while U.S. gold futures for December delivery is down 0.9 per cent at $1,339.40 an ounce.
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OPEC oil output by its 14 member countries fell in August by 79,000 barrels per day (bpd) from July to 32.76 million bpd, below a demand forecast. The U.S. dollar, meanwhile, has declined steadily, something the head of Russian oil major Rosneft said recently was contributing to the rise in crude oil prices.
The initial OPEC-non-OPEC agreement pushed Brent prices up to nearly US$57 a barrel and WTI to over US$54 a barrel in January this year, but since then, the benchmarks have been sliding down, with a few notable interruptions of the trend thanks to supply disruptions and the May decision to extend the cuts beyond the original deadline of June 30, 2017.
The longer-term focus, however, was on a possible extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russian Federation.
"The oil market reacted to the Saudi talks", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting told Reuters. That would come on top of the stockpile growth of 4.6 million barrels officially reported in the previous week to Sept 1 by the U.S. Energy Information Administration.
"It is clear that the rebalancing process is under way", he said. Even if stocks fall by half a million barrels per day (b/d), they will still be about 60 million barrels above the five-year average by March 2018, according to the Paris-based agency. It is also costing them market share to rivals, including partner Russian Federation and the U.S. A quarter of USA refining capacity to be taken off-line due to the hurricane, sapping demand. Some OPEC and non-OPEC ministers have been in discussions in recent days over their production cut strategy, with one of the options on the table being to extend the output restraint agreement beyond its current expiration at the end of March 2018.