Oil’s post-Harvey rally stalls with refinery restarts still iffy
Oil barely budged at the end of last week as doubts linger over the restart of refineries which are flickering back to life in the wake of Hurricane Harvey.
Futures ended the session in New York near a four-week high after the resumption of some plants on the Gulf Coast of Texas drove a rally of about 7% in four days. While millions of barrels of fuel-making capacity have been restored, the resumption of several key plants is still uncertain. Reaction to a government report showing an anticipated jump in US crude stockpiles was muted.
The Gulf Coast is recovering and there does not seem to be significant damage to infrastructure, but “there are a lot of unknowns,” Kyle Cooper, director of research at IAF Advisors in Houston, said. “I think people now are just sitting on the sidelines.”
After slamming into the Texas coast 13 days ago and drenching thousands of square miles with record-breaking rains, Harvey left key US refineries, ports and pipelines out of service or operating at drastically reduced rates. Refiners such as Valero Energy Corporation and Citgo Petroleum Corporation have swiftly resumed operations at Texas plants, but Royal Dutch Shell Plc’s Deer Park refinery on the Houston Ship Channel remains shut.
US crude inventories increased by 4.58 MMbbl last week to 462.4 million, the most since March, according to Energy Information Administration data released the 8th September.
Imports into the US Gulf Coast region fell to the lowest in records going back to 1990.
Gasoline stockpiles slid by 3.2 MMbbl to 226.7 million, the largest decline since mid-July. Crude production tumbled by the most since 2012.
As refineries shut due to Harvey, “you knew that there was going to be a build as it related to crude oil,” said Brian Kessens, a managing director and portfolio manager at Tortoise Capital Advisors LLC, who helps manage US$16 billion in energy-related assets. “We’ll be able to get a better sense of the numbers over the next couple of weeks.”
West Texas Intermediate for October delivery fell seven cents to settle at US$49.09/bbl on the New York Mercantile Exchange. Total volume traded was about 5% above the 100-day average.
Irma hits
Brent for November settlement gained 29 cents to end the session at US$54.49/bbl on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of US$4.96 to November WTI.
Hurricane Irma, a Category 5 storm hit Florida on the 10th September, battered Puerto Rico after slashing across a chain of small Caribbean islands. A mandatory evacuation order was issued for some areas including downtown Miami and Miami Beach, while Barclays Plc has estimated insured losses in a worst-case scenario from the storm at US$130 billion.
NuStar Energy LP’s St Eustatius terminal tanks and other equipment have sustained damage from the hurricane, while Buckeye Partners LP initiated full-plant shutdown procedures at its Puerto Rico plant.
The US Coast Guard closed south Florida ports on the 9th September in preparation for Irma’s landfall and Florida’s governor Rick Scott said measures were taken to expedite fuel delivery ahead of Irma.