The hurricane prompted crude oil shorts to cover their positions, Cushing crude oil inventories continued to fall, and U.S. oil rose 3% intraday

WTI crude oil rose 3% to $67.74 a barrel in United States trading on Wednesday, the biggest gain in two weeks. Brent crude rose 2.5% during the day to settle at $70.92 a barrel. WTI crude oil futures for October delivery closed up $1.56, or 2.37%, at $67.31 a barrel at the close on Wednesday. Brent crude oil futures for October delivery closed up $1.42, or 2.05%, at $70.61 a barrel.

On the news, Hurricane Francine threatened United States Louisiana, and the closure of some oil facilities in the Mexico Gulf was short-covered, which put oil prices on hold back from the ferocious decline since late August.

Hurricane Francine is making its way into Louisiana and is expected to make landfall Wednesday afternoon or late afternoon local time, potentially bringing dangerous storm surges and flooding. Coastal Louisiana, especially the East, is preparing for hurricanes. The United States National Hurricane Center issued an early warning at 4 p.m. local time in Houston that Louisiana will face a life-threatening storm surge and hurricane late Wednesday.

The storm shut down some offshore oil platforms in the Gulf of Mexico but could avoid major gas export plants. The industry expects the storm trajectory to cut off dozens of offshore oil rigs and as many as eight onshore refineries in a state of uncertainty. Oil companies shut down about 40% of the Gulf of Mexico's crude oil production before the storm hit. In recent days, ExxonMobil, Shell and other offshore drilling companies have evacuated crews and suspended operations.

In addition to the impact on oil production, natural gas production in the Gulf of Mexico has also fallen sharply, according to Criterion Research.

Commodities analyst Giovanni Staunovo wrote on the X platform:

Personnel have been evacuated from a total of 171 production platforms, or 46% of the 371 manned platforms in the Gulf of Mexico, according to offshore operator report data submitted as of 11:30 CEST this morning.

The analysis believes that although global crude oil demand has weakened, the current supply in the United States could tighten further if Hurricane Francine causes wells to shut down for several days in a row.

The news of Hurricane Francine overwhelmed the negative impact of last week's unexpected increase in EIA crude inventories, according to United States government data on the same day. WTI crude oil gave up most of its intraday gains at one point on Wednesday after the release of the EIA data.

According to the United States Energy Information Administration (EIA), the week of September 6:

Crude oil inventories rose by 833,000 barrels, while Bloomberg users expected a decrease of 700,000 barrels, while the market expected an increase of 1.05 million barrels, compared with a decrease of 6.873 million barrels in the previous week.

Crude oil inventories in Cushing, where WTI crude oil is delivered, fell by 1.704 million barrels, compared with a decrease of 1.142 million barrels in the previous month.

Gasoline inventories rose by 2.31 million barrels, unchanged expected, and the previous value was 848,000 barrels.

Refined oil inventories increased by 2.308 million barrels, with an expected increase of 275,000 barrels and a previous decline of 371,000 barrels.

Goldman Sachs analyst Robert Quinn recently pointed out that bears have been heavily short Brent crude recently due to poor macroeconomic data and the possible return of Libya crude oil.

CTA is bearish on Brent oil.

Financial blog Zerohedge commented that a large part of oil and gas production in the Gulf of Mexico has been temporarily shut down, and if the disruption continues, it could lead to a sustained short-term rally, catching bears off guard. However, the decline in energy demand in the world's large economies and the deterioration of the macroeconomic backdrop are not a good environment for bulls.

Zerohedge noted that there is a big difference between the EIA data and the previous day's API data for the Industry Edition. Despite this, both reports show a significant decline in crude oil inventories in the important Cushing area, and a continuation of this decline for another 1-2 weeks means that Cushing's inventories are facing the bottom of the tank.

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