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U.S. oil slides 3 percent as Irma threatens demand

12 September, 2017, 13:56 | Author: Jeff Stephens
  • Brent Crude

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.

Investors and analysts were waiting to see Hurricane Irma's impact on (http://www.marketwatch.com/story/hurricane-irma-downgraded-to-category-4-but-remains-extremely-dangerous-on-its-path-to-florida-2017-09-08) oil demand and potential disruptions to energy transportation in the Gulf Coast in the coming days.

NEW YORK: Oil prices rose on Monday as key US refineries began restarts following Hurricane Harvey, which may help revive crude oil processing, while fuel prices fell as Hurricane Irma is likely to clip demand for gasoline and diesel.

In the case of Irma, analysts are more anxious that devastation wrought by the storm could sharply reduce demand for energy. United States crude oil prices are at a one-week low. Prices slid $1.61 to close at $47.48 on Friday, the most since July 5. About 6 percent of USA refining capacity remains shut after nearly a quarter of the nation's capacity was halted following Hurricane Harvey more than two weeks ago.

WTI crude (ERY)(ERX)(XLE) futures rose 0.4% last week, the first weekly gains in the last six weeks.

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"The market is looking for a significant build in oil inventories", said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Southern Gulf Coast states, meanwhile, continue to pick up the pieces from Harvey, which struck a central part of the USA energy sector in late August.

The price for Brent crude oil is, at about $53.50 per barrel early Monday, about $6 per barrel higher than this time last year, but still about $40 less than it was three years ago. According to the latest estimate from commodity pricing group S&P Global Platts, production in August from both countries combined was about a half million barrels per day above the level from October, the month used by OPEC as a peg to gauge cuts and quotas.

The possibility of an extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries and non-OPEC producers also helped to support prices, traders said.

That led to a windfall for some oil bears who had correctly read Hurricane Irma's impact on WTI.

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Irma is the second Category 5 storm, though now downgraded to Category 4, in the USA region in a fortnight after Hurricane Harvey.

But as the refinery sector gradually recovers, so is its crude processing.

Saudi Arabian Energy Minister Khalid al-Falih earlier discussed with his Venezuelan and Kazakh counterparts the possible extension of the global oil supply cut agreement beyond March 2018.

"Imports (of oil) to the US Gulf Coast fell to levels not seen since the 1990s", ANZ bank said.

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Authorities are still surveying damage from the record-breaking storm, and this story will be updated as more details emerge. At the moment Irma is making its slow fateful right turn that will put it on a collision course with Florida's west coast.


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