Oil markets volatile as industry prepares to be hit by Hurricane Harvey
SINGAPORE (Reuters) – Oil prices were volatile early on Friday as the market tried to gauge the potential impact of Hurricane Harvey heading for the coast of Texas, the heart of the US oil industry.
The tropical storm rapidly intensified overnight Thursday, spinning into the potentially biggest hurricane to hit the mainland United States in 12 years and taking aim at the heart of nation’s oil refining industry between Houston and Corpus Christi.
US West Texas Intermediate (WTI) crude futures CLc1 were at $47.72 a barrel at 0036 GMT, up 29 cents, or 0.6 percent, from their last settlement.
Brent crude futures, LCOc1 the international benchmark for oil prices, were at $52.36 per barrel, up 32 cents, or 0.6 percent, from their last close.
Traders said prices rose as oil production in the affected area shut down in preparation for the hurricane.
The prices rises came after crude fell by about 2 percent late in the previous session as refiners also shut down ahead of the storm, reducing their short-term crude demand.
Whether the storm ends up having a bigger impact on crude supplies or on refinery operations remains to be seen.
“Harvey… may disrupt both oil production and refining,” said William O’Loughlin, investment analyst at Rivkin Securities.
“Oil prices initially fell but rallied over the last few hours as traders realise that production disruption may be significant. The storm is certainly bullish for gasoline as refining outages would reduce gasoline supply,” he added.
Beyond the storm’s potential impact on the oil industry, crude remains in ample supply globally despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to hold back production in order to prop up prices.
OPEC, together with other producers including Russia, has pledged to cut output by around 1.8 million barrels per day (bpd) this year and during the first quarter of 2018.
However, not all producers have lived up to their pledges and supplies remain high, resulting in ongoing low prices.
A joint OPEC, non-OPEC monitoring ministerial committee said on Thursday that an extension to the supply-cut pact beyond March was possible, though not yet decided.