Oil rises close to $55 as Saudi supply cut, refineries damaged
Oil-markets on Friday saw Brent crude prices supported by hopes Saudi Arabia will cut October supplies as volume from the United States was curbed by refinery-outages due to Hurricane-Harvey damages.
Focus has now shifted to three other hurricanes that are currently tearing through the Caribbean and Gulf of Mexico.
Brent crude futures rose to 54.57 dollars a barrel at 0735 GMT, with the benchmark for international oil prices earlier holding at $54.79 a barrel, the highest price achieved since April.
Saudi Arabia will cut crude oil allocations to its customers worldwide in October by 350,000 barrels per day (bpd), an industry source familiar with Saudi oil policy told Media on Thursday.
United States West Texas Intermediate (WTI) crude futures were at 48.98 dollars a barrel, 11 cents below their last settlement.
Traders said that the dip was a result of low refining activity following Hurricane Harvey that hit the U.S. Gulf coast two weeks ago, knocking out almost a quarter of the country’s huge refinery industry.
“Most refineries are restarting and we expect a near-full recovery by month-end,” New York-based investment bank Jefferies said.
Harvey’s impact was also felt in oil production.
U.S. oil output fell by almost 8 percent, from 9.5 million barrels per day (bpd) to 8.8 million bpd, according to the Energy Information Administration (EIA).
Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also impacted shipping.
“Imports (of oil) to the U.S. Gulf Coast fell to levels not seen since the 1990s,” ANZ bank said.
Traders said it would take weeks for the U.S. petroleum industry to return to full capacity, and that under the current conditions it was difficult to identify fundamental market trends.
As the oil industry continues to grapple with the fallout from Harvey, a much bigger Hurricane was lashing the Caribbean islands and heading for the United States.
Hurricane Irma, which has become one of the biggest storms ever measured, on Friday hit the Dominican Republic and Haiti, heading for Cuba and the Bahamas.
It was predicted to hit Florida by Saturday, with the EIA maintaining energy disruptions map, which displays energy infrastructure and real-time storm information, to help analysts assess potential energy-related storm effects.
EIA’s energy disruptions map displays key layers of energy infrastructure, including oil refineries, power plants, and major electric transmission lines, and real-time storm information from the National Weather Service.
The U.S. National Hurricane Center (NHC) said on its Website Friday that recent data from both NOAA, the oceanic and atmospheric administration agency, and Air Force reconnaissance planes, indicate that Irma is an extremely dangerous Category 4 hurricane and will continue to bring life-threatening wind, storm surge, and rainfall hazards to the Bahamas through Saturday.
“Hurricane conditions will spread over portions of the north coast of Cuba, especially over the adjacent Cuban Keys, through Saturday,” NHA said.
On Irma’s heels, Hurricane Jose is heading for the Caribbean Leeward islands, which have just been devastated by Irma, with wind speeds of 120 mph (195 km/h).
With storm Katia about to hit the Mexican Gulf coast, there are three major hurricanes currently active in the region.