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Oil trades near four-week high as refining returns after Harvey

Sep 07 2017 09:06
Ben Sharples, Bloomberg

Hong Kong - Oil traded near a four-week high as US refiners return from shut downs caused by Hurricane Harvey and boost crude processing.

Futures slid 0.4% in New York after climbing almost 4% in the previous two sessions. While Motiva Enterprises works to return its Port Arthur refinery, the largest in the US, to 40% production by the end of the weekend, another Atlantic hurricane is approaching. Industry data showed crude inventories rose by 2.79 million barrels last week.

If government figures on Thursday also report an increase, it would be the first since the end of June.

Ports, refineries, pipelines and offshore platforms shut as Harvey intensified before making landfall on August 25, leading to widespread flooding. Many of those facilities are back in service, and Goldman Sachs forecast half of the refining capacity lost to the storm will be back online by Thursday and may prove positive for the oil market in a few months.

“Refineries are coming back and that’s driving short-term demand for oil,” said Ric Spooner, an analyst at CMC Markets in Sydney. “I think $50 is going to be a testing point for the market again. If prices break up through that level, they are unlikely to progress too far because history suggests if they remain in that higher zone long enough, it’ll entice a gain in shale oil production.”

West Texas Intermediate for October delivery was at $48.97 a barrel on the New York Mercantile Exchange, down 19 cents, at 08:45. Total volume traded was about 30% below the 100-day average. Prices gained 1% to close at $49.16 on Wednesday, the highest since August 9.

Brent for November settlement lost 20c to $54 a barrel on the London-based ICE Futures Europe exchange. Prices added 82c to close at $54.20 on Wednesday. The global benchmark traded at a premium of $4.60 to November WTI.

Hurricane Irma, a Category 5 that is forecast to hit Florida on Sunday, may develop into the most expensive storm in US history after devastating a chain of small Caribbean islands. Miami-Dade County issued a mandatory evacuation order for some coastal areas and Barclays has estimated insured losses in a worst-case scenario from the storm at $130bn.

Oil-market news:

• US crude stockpiles probably expanded by 4 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report on Thursday.

• Texas shale drillers are finding their supply chain and manpower tested as they work to get back to normal after Hurricane Harvey.

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commodities  |  markets  |  oil
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