Published: Wed, September 13, 2017
Business | By Max Garcia

Oil Drops On Concerns Irma Could Affect US Demand

Oil Drops On Concerns Irma Could Affect US Demand

The EIA reported that refinery runs last week averaged 14.5 million barrels of crude, a decline from 17.7 million bpd the week before, when the authority also reported a 5.4-million-barrel draw in crude oil inventories.

Oil prices oscillated Monday morning, with USA crude recovering a fraction of its losses from the last session and Brent trending downwards. 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.

The differential "can be explained in part by lower demand for US crude oil in the next few weeks, as some refineries on the [Gulf Coast] will remain closed.while demand is also likely to suffer as a result of the devastation caused by Hurricane Irma in Florida", according to analysts at Commerzbank.

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. The price for Brent crude oil, the global benchmark, was down 0.67 percent to $53.42 per barrel.

Irma was downgraded to a tropical storm early Monday by the U.S. National Hurricane Center.

The value of the dollar would influence the market price and US exports over the same four-week period are up 12.3 percent. The Energy Information Administration on Thursday reported (http://www.marketwatch.com/story/oil-gains-ahead-of-expected-drop-in-gasoline-stockpiles-2017-09-07) that US crude inventories rose 4.6 million barrels for the week ended September 1.

The nation's largest refinery, the Motiva plant in Port Arthur, is running at half capacity. Hurricane Irma does not pose a threat to oil production but it is likely to have an impact on demand for gasoline.

Next week, the market will see monthly reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency on Tuesday and Wednesday, respectively.

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. Gasoline prices have soared as drivers filled up their tanks, but crude oil prices have fallen because producers have had fewer places to sell their product. October heating oil lost 2.1 cents, or 1.2%, to $1.765 a gallon, trading around 1% higher on the week.

"When refineries gave signals that damage was not too great and restarts were on the table, then crude rose back up and then continued higher", said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo.

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