Oil Near 5-Month High as Laura Menaces Refineries

Oil Near 5-Month High as Laura Menaces Refineries
Oil held at a five-month high as the market braced for disruptions to production and refining.

(Bloomberg) -- Oil held at a five-month high as the market braced for disruptions to production and refining from Hurricane Laura and after a further drop in U.S. crude stockpiles added to optimism that demand is recovering.

Futures in New York were steady near $43 a barrel after closing at the highest since March 5 on Wednesday. Laura made landfall early Thursday at Cameron, Louisiana, near the border with Texas, as a Category 4 storm. While the hurricane’s path shifted away from refineries and ports in the Houston area, the stretch of coastline that will feel its full impact accounts for about a quarter of U.S. refining capacity.

American crude inventories fell by 4.7 million barrels last week, according to an Energy Information Administration report, the fifth straight weekly decline. A drop in gasoline stockpiles to the lowest since December and an increase in refinery run rates provided more evidence that the energy demand recovery in the world’s largest economy is gathering pace.

More than 80% of oil output in the Gulf of Mexico and almost 3 million barrels of a day of refining capacity has been shut ahead of Laura’s landfall, causing a spike in U.S. gasoline prices. It’s also disrupting energy flows, with trans-Atlantic shipping rates rising and more than 60 oil and refined product tankers in the western U.S. Gulf waiting for Laura to pass, according to ship-tracking data compiled by Bloomberg.

The hurricane has helped oil break out of its narrow range, although “I would have anticipated a stronger move on prices,” said Edward Moya, senior market analyst at Oanda Corp. “That’s because of concern over the coronavirus and continued demand destruction.”


  • West Texas Intermediate for October delivery declined 0.2% to $43.30 a barrel on the New York Mercantile Exchange at 7:38 a.m. in London
    • The contract climbed 0.1% Wednesday following a 1.7% jump in the previous session
  • Brent for the same month added 0.1% to $45.64 a barrel on the ICE Futures Europe exchange after falling 0.5% on Wednesday

Still, Laura is likely to have only a temporary market impact, with Covid-19 continuing to cloud the prospects for a more sustainable recovery in oil prices. The market may have recovered from the shock that saw WTI plunge below zero in April, but the oil industry continues to consolidate with prices stuck in the low $40s a barrel. Norway’s Equinor ASA announced it would trim its workforce in the U.S., Canada and the U.K. by 20% on top of previously announced cuts.

Brent’s front-month contract was trading at a discount of 49 cents a barrel to the second month. The contango structure has narrowed from 58 cents at the end of last week, suggesting concern about over-supply has eased slightly.

Other market drivers

  • India’s oil-product demand is set to slump to a five-year low this financial year, with a bleak outlook for diesel consumption as the nation’s truck operators idle vehicles and consider cutting the size of their fleets.
  • Saudi Aramco appointed a new chief executive officer to run its $500 million venture capital and investments arm after the previous head departed, according to people with knowledge of the situation.
  • Crude futures rose 0.1% to 294.7 yuan a barrel on the Shanghai International Energy Exchange after climbing 0.4% on Wednesday.

--With assistance from Ben Sharples.

© 2020 Bloomberg L.P.


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.