Meanwhile, Hurricane Irma in the Atlantic is bearing down, “and if the expected track begins to favor a Gulf landfall, expect speculation bids to come flowing into the energy space again, including natural gas, which traded well last week on the weather-related drama and a less-reported bullish development in supply”, said Richey.
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The biggest storm in more than five decades to hit the Texas coast took about 20 percent of the country’s refining capacity offline. If crude output is hindered by the new storms it would boost prices, the analysts said. Valero’s refinery in Corpus Christi and Three Rivers are now back online, but Platts suggests they are operating at half capacity. By early September 1, the Department of Energy had confirmed that it had approved the release of 4.5 million bbl of crude from the SPR to three refiners-Phillips 66, Marathon Petroleum, and Valero Energy.
Oil prices gained on fears of potential damage to US oil production from Hurricane Irma, as well as renewed demand for crude from restarted refineries in the Gulf Coast.
As of August 25, gasoline stocks in the region were near the high-end of the five-year average.
Houston – About 6.1 percent of USA oil production in the Gulf of Mexico is still suspended driven by the tropical storm Harvey, the Federal Bureau of Safety and Environmental Enforcement said on Sunday. In industry terms, a short squeeze powered the gasoline contract well past $2 gallon to the high.
USA crude stockpiles likely rose by 4 MMbbl last week, while gasoline inventories shrank by 5.2 MMbbl for the biggest decline since March, according to a Bloomberg survey before government data to be released on Thursday, a day later than usual because the Labor Day holiday was on Monday.
But then Harvey knocked out about a quarter of USA refining capacity and shuttered transport routes for crude, gasoline, diesel and other products. “Irma is forecast to remain a powerful Category 4 or 5 hurricane during the next couple of days”, said the US National Hurricane Center. The AAA predicts gas prices could go up another nickel or more.
Gas prices have been low in recent years for several reasons.
DOE’s initial release includes dumping 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil – sweet crude contains less sulfur than sour.
Yet while oil import dependency has plunged from 60% in 2005 to just 25% today, the refining of domestically produced oil has concentrated even more in the Gulf region.
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“The oil majors are looking more comfortable at lower oil prices, posting strong quarterly results in Q2 despite weaker upstream revenue”, BMI Research stated.
