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Oil Jumps as Post-Harvey Refinery Revivals Trigger Demand Boost

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Crude oil
  • Oil Jumps as Post-Harvey Refinery Revivals Trigger Demand Boost

Crude advanced the most in six weeks as key refineries and pipelines resumed operation following hurricane-driven shutdowns, stoking demand and making oil futures the best-performing energy contract of the day.

Oil climbed as much as 3.6 percent in New York. Refiners including Valero Energy Corp. and Citgo Petroleum Corp. worked to get Texas plants back on track, while Exxon Mobil Corp. began supplying filling stations with fuel after repairs to a Houston pipeline. Even as the hardest-hit operators worked to resurrect output, traders watched another major hurricane approaching from the east that has already led to the shutdown of an oil terminal.

The market was “waiting for the refineries to restart so demand could start to pick up again,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle, which oversees $142 billion of assets, said by telephone. “That’s really what speculators had been waiting for.”

Harvey forced refineries, pipelines, ports and offshore platforms to shut as the storm intensified before making landfall on Aug. 25. While many of those facilities are back in service, others have yet to resume production, including plants owned by Royal Dutch Shell Plc and Total SA. Still, Goldman Sachs Group Inc. sees half of the refining capacity lost to Harvey back to work by Sept. 7. Dry weather across southeast Texas should help minimize the loss of demand for gasoline and diesel, according to the bank.

Fuel makers are “starting to put more supply into the chain — that’s going to put pressure on gasoline prices,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. Simultaneously, oil demand is rebounding “and you get the corresponding rally in crude oil prices.”

West Texas Intermediate crude for October delivery added $1.44 to $48.73 a barrel at 12:33 p.m. on the New York Mercantile Exchange. Earlier in the trading session, the contract was up as much as 3.6 percent for the biggest intraday gain since July 25. Brent for November settlement advanced $1.07 to $53.41 a barrel on the London-based ICE Futures Europe exchange and traded at a premium of $4.25 to November WTI.

October gasoline futures dropped 5.29 cents to $1.6950 a gallon. There was no settlement Monday because of the U.S. Labor Day holiday.

Repairing Damage

Total SA said it is repairing damage and restoring normal utility systems at its Port Arthur, Texas, plant and Shell said its assessing start-up efforts at its Deer Park refinery near Houston. Meanwhile, Enterprise Products Partners LP resumed operations at marine terminals and Sunoco LP was said to have restarted its Mag-Tex refined products pipeline system as of early Tuesday.

Irma, now a Category 5 hurricane, prompted Florida officials to declare a state of emergency for the storm expected to cross the northern Leeward Islands late Tuesday and early Wednesday. The U.S. National Hurricane Center issued warnings for the U.S. and British Virgin Islands, Puerto Rico, Vieques and Culebra. NuStar Energy LP said it shut its St. Eustatius oil terminal on Monday in the Caribbean in advance of the hurricane.

“There is a wild-card heading in our direction rather quickly and it’s not a good one — Irma,” Yawger said. “I’m not sure how this is going to pan out yet, but it has the potential to get into the Gulf.”

Oil-market news:

  • Cushing, Oklahoma, crude stockpiles increased by 1 million barrels last week, according to a forecast compiled by Bloomberg.
  • Strong refining margins will last “several years,” Morgan Stanley said in a note.
  • Russia and Saudi Arabia discussed the possibility of extending the OPEC-led agreement to cut oil production at a meeting in St. Petersburg, Russian Energy Minister Alexander Novak said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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