Oil price set to slip after hurricane, Exxon restarts Texas operations

• Brent crude holds above $45 a barrel despite storm hitting major US oil fields
• ExxonMobil to restart Texas operations, but oil woes see it dropped from the Dow Jones
• IG analysts forecast short-term downside for Brent crude, but uptrend still in play

Crude prices were resilient on Friday, despite Hurricane Laura tearing through major US oil fields in Louisiana and Texas, but the commodity continues to face downward pressure amid the coronavirus pandemic.

Thankfully, the hurricane passed through the heart of the US oil industry without causing the level of damage that many thought it would, with refiners and producers in the area like ExxonMobil and Valero Energy readying their respective operations in the region for a restart.

However, not all companies in the area were so lucky, with Citgo Petroleum’s Lake Charles plant in Louisiana sustaining significant damage that will see it out of operation for up to six weeks.

Brent crude is trading marginally lower on Friday at $45.05 a barrel at the time of publication, while the US West Texas Intermediate (WTI) is two cents higher at $43.06.

Oil price outlook: technical analysis

Brent crude has managed to gain ground as fears around Hurricane Laura signalled a possible impact on output in the region. However, with the hurricane downgraded to a storm, there is hope that we have seen the worst of it, according to Josh Mahony, senior market analyst at IG.

‘Brent is currently turning lower after that latest rise, with the price looking to potentially drop back into trendline support,’ Mahony said.

‘Given the long-term uptrend in play, this current short-term pullback does look like a retracement of the rally from $44.04,’ he added. ‘Thus while we could see further short-term downside, it ultimately looks like a retracement and potential buying opportunity before long.’

Oil market turmoil leads to symbolic Dow Jones exit for Exxon

A shake-up in the Dow Jones Industrial Average index offered insight into how the negative price outlook for crude is impacting companies operating in the oil and gas industry.

ExxonMobil was once one of the world’s most valuable stocks and has been a member of the Dow Jones since 1928. But next Monday, the oil and gas major will no longer feature on the index due to its share price falling more than 40% this year amid low crude prices.

However, the oil and gas major could return to the index if demand recovers, but that outcome relies on a stabilising of the coronavirus crisis which continues to hinder global economic activity.

Rivals like BP and Royal Dutch Shell have suffered similar slumps in their respective share prices due to the challenging market conditions. But both have opted to write-off billions in oil and gas assets in order to focus their attention on transitioning to renewables due to the dim price outlook for crude.

‘Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences,’ BP chairman Helge Lund said in a statement. ‘And in these transforming markets, bp can compete and create value, based on our skills, experience and relationships.’

‘We are confident that the decisions we have taken and the strategy we are setting out today are right for BP, for our shareholders, and for wider society,’ he added.

Without Exxon, the Dow Jones only remaining oil and gas company is Chevron.

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