Oil mixed amidst Irma demand fears, Saudi cut extension talks

Andrew Cummings
September 13, 2017

Irma, however, was not expected to affect supply as it was headed away from US oil production in the Gulf.

Meanwhile, a separate report from RBC Capital Markets said a resilient USA shale oil sector and robust production from Libya and Nigeria, two members of the Organization of Petroleum Exporting Countries exempt from a multilateral production cut deal, means oil prices may stay lower for even longer than expected. This is because most of the news continues to center on USA production in the wake of the impact of Hurricane Harvey on us refinery output the week before.

United States crude prices have tumbled down more than three per cent on worries that energy demand would be hit hard as Hurricane Irma, one of the most powerful storms in a century, headed toward Florida and the Southeast.

The deal agreed late a year ago to reduce output by about 1.8 million bpd until March 2018 helped to keep prices as high as $58 a barrel in January, but they have since sagged as global stocks have not fallen as quickly as expected. Brent crude was down 71 cents, or 1.3 percent, to $53.78 a barrel after reaching its highest level since April at $54.87.

It comes trailing Hurricane Harvey, which struck the US oil hub of Texas two weeks ago, affecting a quarter of the nation's refineries, many of which are now resuming operations. When the value falls, commodity prices increase because more dollars are required to purchase the same quantity as when the value was higher.

The Energy Information Administration (EIA) reported a build of 4.6 million barrels in the week to September 1st which was slightly larger than the analyst consensus for a build of 4 million barrels and followed a draw of 5.4 million barrels in the prior week.

Brent prices, meanwhile, slipped back, but held ground near a 5-month high as they continue to find support from higher refinery demand in Europe and Asia. While parties to the deal hope the oil market will eventually rebalance, growing oil production in the US will prolong this period, he noted.

The possibility of an extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries and non-OPEC producers also helped to support prices, traders said.

It was the biggest daily loss since July, but prices still ended the week up 19 cents, or 0.4%, to score their first weekly gain in six weeks.

Among refined products, October gasoline was down less than half a cent at $1.660 a gallon.

If the refineries have extended outages, it could come back to bite the oil field again, the Goldman Sachs report said, and "over time create risk of onshore production disruptions".

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