Crude prices slipped back in Asian trade Wednesday as a key US oil-producing region reeled from the devastation caused by monster storm Harvey.
Harvey rolled into Texas on Friday as a Category Four hurricane, tearing down homes and businesses on the Gulf Coast, and triggering massive floods.
The storm caused the closure of many oil refineries, which analysts said would lead to bigger crude stockpiles and push down prices.
In early afternoon Asian trade, US benchmark West Texas Intermediate was down 14 cents at $46.30 while Brent crude for October eased 21 cents to $51.79.
"The effect of Hurricane Harvey has been devastating on the US," said Sukrit Vijayakar, an analyst with energy consultancy Trifecta.
"In terms of the energy market, what needs to be seen is how soon the shut in capacity comes back on stream."
Energy information provider S&P Global Platts said in a report Wednesday that roughly 2.33 million barrels per day of Texas's refining capacity was still shut down.
The Gulf of Mexico alone accounts for 20 percent of US oil production, and many rigs were also knocked out by the storm.
Rain continued to pummel the area Wednesday, as emergency services battled to reach hundreds of people stranded by flooding in a massive round-the-clock rescue operation.
Oil prices pulled by Harvey, North Korea
Washington (UPI) Aug 29, 2017 –
Crude oil prices continued to lose ground because of the fallout from Tropical Storm Harvey, though prices may be supported by tensions over North Korea.
U.S. offshore regulators estimated that, as of Monday, about 19 percent of the total daily production from the Gulf of Mexico was idled by the storm, which remains parked over parts of south Texas. Onshore, many of the nation's refineries remain offline because of heavy flooding in and around the Houston area.
Vandana Hari, an industry analyst and founder of Vanda Insights, said Monday that production would come back sooner than the refineries and put supply-side pressures on the markets short-term, which helps explain yesterday's steep drop in crude oil prices.
In a filing with the Texas Commission on Environmental Quality, regional refiner Flint Hills Resources said it was in the process of restarting its West Refinery already. Patrick DeHaan, a petroleum analyst who monitors the upstream sector for GasBuddy, told UPI the restart process may be gradual, however.
Outside of the immediate impact from Harvey, last week saw another decline in U.S. exploration and production activity. Oil prices need a so-called Goldilocks number — one that's not so high that it stimulates robust production and not so low that it stymies the industry — and U.S. operators are reacting as the market remains stuck near the $50 per barrel level.
West Texas Intermediate, the U.S. benchmark for the price of oil, has pulled far away from the global benchmark Brent, but an emailed report from London oil broker PVM said it's "only a question of time for WTI-priced U.S. crude oil to start strengthening against other benchmarks."
A snapshot of the retail gasoline sector from AAA this week said the market is still "jittery" because of Harvey. The price for Brent crude oil was down 0.1 percent at 9:18 a.m. EDT to $51.84 per barrel. WTI was down 0.26 percent to $46.45 per barrel.
At the geopolitical level, markets could be showing a fear-factor in Tuesday trading as tensions continue to escalate over North Korea. The White House reacted sternly after Pyongyang fired a missile over Japan.
"Threatening and destabilizing actions only increase the North Korean regime's isolation in the region and among all nations of the world," a statement from U.S. President Donald Trump read. "All options are on the table."
The price for crude oil will move after the U.S. markets close when the American Petroleum Institute releases data on crude oil and gasoline inventories. Traders look to those figures for an indication of the trend for the five-year average of storage levels, which remain in surplus.
Profits up 40 percent for Chinese oil and gas company Sinopec
Chinese oil and gas company Sinopec said net profit for the first half of the year was up 40 percent in response to domestic demand and higher crude oil prices.
The company, known formally as China Petroleum & Chemical, reported a net profit for the first six months of the year at $4.2 billion, up 40 percent from the same period last year. Net cash flow was down about three quarters of … read more
