Oil heads for four-week high as demand for crude rises

Oil heads for four-week high as demand for crude rises

Oil approached a four-week high as refiners revved up plants pounded by Hurricane Harvey, sparking demand for crude.
Oil heads for four-week high as demand for crude rises

Futures rose as much as 1.4% in New York while gasoline dropped, extending a three-day, 23% decline. Motiva Enterprises LLC’s refinery 90 mi east of Houston, which processes more crude than any other North American plant, was on track to reach 40% of its normal working rate within days. Dozens of tankers that had been stranded offshore when Harvey shut every major Texas port began delivering cargoes of crude to refiners that had been in danger of running dry last week.

The restart of Gulf refineries “implies that we are not going to get these great accumulations of inventory in oil as some had thought,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone.

Harvey knocked out more than 20% of the nation’s refining capacity in just 48 hr, according to Sandy Fielden, Morningstar Inc.’s director of oil and products research. The storm also shut pipelines, ports and offshore platforms as it intensified before making landfall on Aug. 25. Although many of those facilities are back in service, the recovery is incomplete because of extensive flooding in some areas that will probably require expensive, time-consuming repairs.

“The post-Harvey clean-up is in full swing and the U.S. energy business is returning to normality,” said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. “Refineries are resuming operations and ports are re-initiating trade.”

West Texas Intermediate crude for October delivery climbed 44 cents to $49.10/bbl at 10:20 a.m. on the New York Mercantile Exchange. WTI is heading toward its 200-day moving average at about $49.50/bbl.

Brent for November settlement added 52 cents to $53.90/bbl on the London-based ICE Futures Europe exchange, after earlier rising to the highest since the last OPEC ministerial meeting on May 25. The global benchmark traded at a premium of $4.34 to the November WTI contract.

October gasoline futures in New York dropped 2.7% to $1.6536/gal.

Hurricane Irma

U.S. crude stockpiles likely rose by 4 MMbbl last week, while gasoline inventories shrank by 5.2 MMbbl for the biggest decline since March, according to a Bloomberg survey before government data to be released on Thursday, a day later than usual because the Labor Day holiday was on Monday. The industry-funded American Petroleum Institute will release its inventory data on Wednesday.

After making landfall, Hurricane Irma headed toward Puerto Rico on a path that may bring it ashore in Florida. The latest models show it veering away from oil platforms in the central and western Gulf of Mexico and sparing Houston from more devastation. NuStar Energy LP shut its St. Eustatius oil terminal on Monday.

“The upgrade of Hurricane Irma may have spurred some precautionary buying of crude oil,” said Jens Naervig Pedersen, senior analyst at Danske Bank A/S in Copenhagen. “The impact of Harvey and likely impact of Irma will distort upcoming U.S. inventory data and thus limit visibility in the oil market with regards to the ongoing rebalancing process.”

Source: Worldoil.com

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