US Crude Futures Drop as Hurricane Irma Approaches Florida

WTI Crude Oil Daily Analysis – September 4, 2017

API reports draw while the market awaits EIA report

US refineries are just returning to their feet after last week's Hurricane Harvey, with about 3.8 million barrels per day (bpd) of refining capacity, or 20 percent of the USA total, remaining shut as of Wednesday.

Prices fell due to the uncertainty from Hurricane Irma.

Oil prices fell on Friday as Hurricane Irma drove towards US state of Florida.

Goldman Sachs is tentatively estimating Harvey's impact on demand at about 600,000 barrels a day in the month following landfall, while the firm sees Irma's initial impact at around 300,000 barrels a day.

The U.S. Energy Information Administration said the four week average for total crude oil production of 9.3 million barrels per day as of September 1 was 9.5 percent higher than a year 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. Prices slid $1.61 to close at $47.48 on Friday, the most since July 5.

Hurricane Harvey hit the U.S. Gulf coast two weeks ago, and crude prices initially slumped because nearly a quarter of the country´s huge refinery industry was knocked out by the storm, cutting demand for crude oil, refining´s lifeblood.

USA energy firms cut oil rigs for a third time in the past four weeks as a 14-month drilling recovery stalled, with energy firms reducing spending plans in response to falling crude prices.

People of Florida pray for deliverance from the wrath of Irma
Storm surge was estimated at 10 feet above normal tide levels at Cudjoe Key, Florida, where Irma made landfall Sunday morning. More than 6.5 million homes and businesses statewide remained without power, and 180,000 people huddled in shelters.

Meanwhile, rising US inventories also weighed on the market. Brent crude was down 71 cents, or 1.3 percent, to $53.78 a barrel after reaching its highest level since April at $54.87.

Analysts said, however, that the slowdown in refining and output should be temporary.

Irma has knocked out power to 4.5 million customers, paralyzed tanker traffic and shut about 6,000 gasoline stations.

"While some are concerned about the demand side [from Irma] I don't think it's that big a situation", said James Williams, president of energy consultant WTRG Economics, noting that Harvey had more of an impact on crude, "The demand for crude is going to be set by the refineries coming back online".

Exxon Mobil Corp's 362,300-barrel-per-day (bpd) Beaumont, Texas, refinery which shut on August 30 due to flooding, may remain closed until the first week of October, sources familiar with plant operations said. Refining runs on the U.S. Gulf Coast hit a record low in the week to September 1, just after the storm, due to shutdowns. Production fell due to Hurricane Harvey.

Saudi Arabia and Venezuela agreed to leave rebalancing options open, including on the possible extension of efforts to rebalance the market beyond the first quarter of 2018, the Saudi energy ministry said in emailed comments after a meeting between the countries' energy ministers in Astana on Saturday.

Latest News