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Oil prices slide in Harvey's wake as U.S. refineries notch slow recovery

11 September, 2017, 22:47 | Author: Jeff Stephens
  • WTI Crude Oil

The West Texas Intermediate for October Delivery lost 1.61 dollar to settle at 47.48 dollars a barrel on the New York Mercantile Exchange, while Brent crude for November delivery lost 0.71 dollar to close at 53.78 dollars a barrel on the London ICE Futures Exchange.

Oil markets were mixed on Friday, with Brent crude supported by expectations that Saudi Arabia could cut its October supplies, while USA crude was weighed down by refinery outages due to damage from Hurricane Harvey, which dented demand.

About 6 percent of US refining capacity remains shut after nearly a quarter of the nation's capacity was halted following Hurricane Harvey more than two weeks ago. A plan implemented by the Organization of Petroleum Exporting Countries in January to erase the surplus on the five-year average for global crude oil inventories through managed production declines helped put a floor under crude oil prices, but it's a shaky one. While Irma is an even stronger storm than Harvey, it is not clear if it will hit oil industry facilities in the Gulf region.

Brent Crude Oil
Weekly December Brent Crude Oil

US crude settled down $1.61, or 3.3 percent, at $47.48 a barrel. Earlier, Hurricane Harvey put pressure on US oil sector.

Portfolio managers also increased their net long position in European gasoil by 2.8 million tonnes to 15.7 million tonnes, the highest since at least 2014.

USA crude prices have tumbled down more than three per cent on worries that energy demand would be hit hard as Hurricane Irma, one of the most powerful storms in a century, headed toward Florida and the Southeast.

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The latest Baker Hughes data recorded a small decline in active drilling rigs for the third week in the last four releases, although there was some uncertainty whether the data had been distorted by the impact of hurricane Harvey.

Wednesday's settlement saw the week's high at $49.16.

Analysts said Brent was likely to retain its edge over WTI in the near-term based on indications Saudi Arabia will be cutting supplies again next month.

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The U.S. Energy Information Administration report on oil inventories is due on Thursday at 11:00 a.m. EDT-a one-day delay due to the United States holiday.

Investors and analysts were also looking ahead to monthly reports from OPEC and the International Energy Agency later this week. Russian Federation is a party to the effort and is cutting the most among non-OPEC members.

OPEC and other major oil producers such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan reached an agreement in December 2016 to remove 1.8 million barrels a day from the market. Allocations to customers in Europe will drop by 70,000 bpd. With so many refineries shut down, there was nowhere to put crude but in storage. "What we have here is an unique hurricane situation that's giving Brent a pop, which otherwise isn't deserved".

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