Oil's Post-Harvey Rally Stalls With Refinery Restarts Still Iffy
(Bloomberg) -- Oil barely budged on Thursday as doubts linger over the restart of refineries that are flickering back to life in the wake of Hurricane Harvey.
Futures ended the session in New York near a four-week high after the resumption of some plants on the Gulf Coast of Texas drove a rally of about 7 percent in four days. While millions of barrels of fuel-making capacity have been restored, the resumption of several key plants is still uncertain. Reaction to a government report showing an anticipated jump in U.S. crude stockpiles was muted.
The Gulf Coast is recovering and there doesn’t seem to be significant damage to infrastructure, but “there are a lot of unknowns,” Kyle Cooper, director of research at IAF Advisors in Houston, said by telephone. “I think people now are just sitting on the sidelines.”
After slamming into the Texas coast 13 days ago and drenching thousands of square miles with record-breaking rains, Harvey left key U.S. refineries, ports and pipelines out of service or operating at drastically reduced rates. Refiners such as Valero Energy Corp. and Citgo Petroleum Corp. have swiftly resumed operations at Texas plants, but Royal Dutch Shell Plc’s Deer Park refinery on the Houston Ship Channel remains shut.
U.S. crude inventories increased by 4.58 million barrels last week to 462.4 million, the most since March, according to Energy Information Administration data released Thursday. Imports into the U.S. Gulf Coast region fell to the lowest in records going back to 1990. Gasoline stockpiles slid by 3.2 million barrels to 226.7 million, the largest decline since mid-July. Crude production tumbled by the most since 2012.
As refineries shut due to Harvey, “you knew that there was going to be a build as it related to crude oil,” said Brian Kessens, a managing director and portfolio manager at Tortoise Capital Advisors LLC, who helps manage $16 billion in energy-related assets. “We’ll be able to get a better sense of the numbers over the next couple of weeks.”
West Texas Intermediate for October delivery fell 7 cents to settle at $49.09 a barrel on the New York Mercantile Exchange. Total volume traded was about 5 percent above the 100-day average.
Brent for November settlement gained 29 cents to end the session at $54.49 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $4.96 to November WTI.
Hurricane Irma, a Category 5 storm that is forecast to hit Florida Sunday, battered Puerto Rico after slashing across a chain of small Caribbean islands. A mandatory evacuation order has been issued for some areas including downtown Miami and Miami Beach, while Barclays Plc has estimated insured losses in a worst-case scenario from the storm at $130 billion.
NuStar Energy LP’s St. Eustatius terminal tanks and other equipment have sustained damage from the hurricane, while Buckeye Partners LP initiated full-plant shutdown procedures at its Puerto Rico plant. The U.S. Coast Guard plans to close south Florida ports Saturday in preparation for Irma’s landfall and Florida’s governor Rick Scott said measures will be taken to expedite fuel delivery ahead of Irma.
Russia would benefit from extending the accord with OPEC to limit oil production, said the country’s finance minister. Devon Energy Corp.’s CEO Dave Hager said that the “vast majority” of Eagle Ford shale production shut in by Hurricane Harvey will resume by the end of the week. Texas shale drillers are finding their supply chain and manpower tested as they work to get back to normal after Harvey.
With assistance from Ben Sharples, Rakteem Katakey, Grant Smith and Kevin Varley. To contact the reporter on this story: Jessica Summers in New York at email@example.com. To contact the editors responsible for this story: Reg Gale at firstname.lastname@example.org Carlos Caminada, Joe Carroll.
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