IEA: Oil markets managed, but beware of the weather

Andrew Cummings
September 13, 2017

USA crude settled up more than 1% on Monday, paring some of its huge discount to global oil benchmark Brent, as Hurricane Irma's initial damage on the domestic oil industry look more contained than thought.

USA crude stockpiles rose almost twice expected levels last week as refineries cut output following Hurricane Harvey, while gasoline and distillate inventories drew, industry group the American Petroleum Institute said after the market settled. Refinery utilization rates slumped to 79.7% of total capacity, the lowest since 2010. Estimates from market intelligence firm Genscape showed an inventory growth of 1.2 million barrels in Cushing last week, said market sources who saw that data on Monday.

"This is due to the shooting up of demand for prompt-loading barrels and amid increasing sentiment that the oil market will rebalance over the next year with a major drawdown in crude and product stocks", Opec said in the report.

Official data from the Energy Information Administration will be released Wednesday.

Harvey struck the USA oil hub of Texas two weeks ago, knocking out a quarter of the nation's refineries.

Brent crude LCOc1 fell 4 cents to $53.80 per barrel, while the US West Texas Intermediate (WTI) crude CLc1 slipped 3 cents to $48.04, reported Reuters.

"Harvey, as a result, had a significant negative impact on refineries and ethylene crackers utilization and their crude and [natural-gas liquids] feedstock demand", the analysts said.

The global surplus of crude and stocks over the five-year average fell to 190 million barrels.

Royal Dutch Shell Plc's Deer Park, Texas, refinery was said to have some units heating up in preparation for restarting this week, according to a person familiar with operations.

Meanwhile, Saudi Arabia-the world's largest exporter of crude oil-said Sunday that the country's energy minister and his Venezuelan counterpart had discussed the possibility of extending OPEC's oil output cut deal beyond the March 2018 expiration date.

Expectations for a hefty weekly rise in USA crude-oil supplies limited the price rise for oil, however. It is also important to note that overall production from OPEC including the exempted members like Nigeria, and Libya increased by 173,000 barrels per day and some members are yet to comply with the agreed level of output.

Geopolitical tensions, concerns about USA policy reform viability and the decline in the US dollar have helped stimulate oil prices, a Kuwaiti bank said.

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