Light, sweet crude oil prices on the New York Mercantile Exchange dropped by more than $1 on Aug. 28 while gasoline futures climbed as expected after Hurricane Harvey slammed Texas on Aug. 25. Tropical Storm Harvey returned offshore Texas on Aug. 28.
Analysts said Houston-area flooding pressured US crude benchmark oil prices down because investors feared disruptions to refineries would weigh on crude demand.
Concerns about possible gasoline shortages drove gasoline futures prices higher in what analysts called the biggest 1-day gain in more than 3 months. S&P Global Platts said about 2.2 million b/d of Texas refining capacity remained down near major ports in Corpus Christi and Houston. Hurricane Harvey made landfall around Port Aransas, Tex., near Corpus Christi.
“On the surface, one may assume the impact from Hurricane Harvey would be bullish for oil prices…[but] refinery run rates will slow, which should see crude oil inventories growing in the short term,” ING Bank analysts said in an Aug. 29 research note.
“All told, we see a push and pull between lower production boosting WTI and lower run rates-exports pressuring WTI,” ING analysts said.
Barclays Research analysts said, “Disruptions to refineries, production, and trade will make the Energy Information Administration data even noisier and less useful.” Barclays referred to the weekly US government oil and product inventory report.
The US Bureau of Safety and Environmental Enforcement said reports from offshore oil and gas operators showed 18.94% of US Gulf of Mexico oil production, or 331,370 b/d, remained shut in as of midday Aug. 28 following weather-associated evacuations (OGJ Online, Aug. 28, 2017).
Meanwhile, a weakening US dollar supported oil prices. The dollar weakened in comparison with other currencies following news that North Korea launched a ballistic missile over Japan.
Ole Hansen, head of commodity strategy at Saxo Bank, said, “This is dollar weakness we haven’t seen for quite a while.” Oil is traded in US dollars so a weaker dollar makes oil less expensive for buyers using other currencies.
The spread between the US benchmark and Brent crude reached a 2-year high of more than $5.30/bbl on Aug. 28.
Energy prices
The October light, sweet crude contract on NYMEX fell $1.30 on Aug. 28 to settle at $46.57/bbl while the November contract was down by $1.16 to settle at $46.96/bbl.
The NYMEX natural gas price for September fell 3¢ to a rounded $2.93/MMbtu. The Henry Hub cash gas price was $2.92/MMbtu, down 1¢.
Heating oil for September rose 1.3¢ to a rounded $1.64/gal. Reformulated gasoline stock for oxygenate blending for September rose a rounded 4.6¢ to a rounded $1.71/gal.
The Brent crude contract for October on London’s ICE was down 52¢ to $51.89/bbl. The November contract dropped 56¢ to $51.42/bbl. The September gas oil contract was $484.25/tonne on Aug. 28, up $4.25.
OPEC’s basket of crudes on Aug. 28 was $49.86/bbl, down 7¢.
Contact Paula Dittrick at [email protected].
