Oil prices remained below $52 on international markets on Wednesday, hindered by concerns over demand for crude oil due to significantly reduced refining activity in the U.S. as a result of Hurricane Harvey.
On the London market, the price of a barrel was almost unchanged from the previous close, amounting to $51.77. There were no significant price changes on the U.S. market either, where a barrel traded at $46.19.
Yesterday, due to Hurricane Harvey, refining capacities in the U.S. were closed at around 4.1 million barrels per day, which corresponds to 23 percent of U.S. production, reported investment bank Goldman Sachs.
The recovery of refining activity will take at least a week or more at best.
– Normalization of operations will take time, and refineries in the U.S. are preparing for a longer shutdown, emphasizes Stephen Brennock from brokerage firm PVM.
In such an environment, derivative prices have again risen sharply, supported by information from unnamed sources that Total’s refinery in Port Arthur, Texas, was closed due to a power outage.
Gasoline prices in futures contracts jumped 5.5 percent to $1.8858 per gallon, the highest level since July 2015. A gallon of diesel increased by 2.5 percent to $1.7076.
– Crude oil is always easier to replace than derivatives, explains Olivier Jakob from consulting firm Petromatrix. “It would be very problematic if refineries were closed for more than a week or 10 days,” he adds.
In addition to closed refineries, the hurricane also resulted in reduced oil production in the U.S., by about 1.4 million barrels per day, which corresponds to about 15 percent of total production, according to Goldman Sachs.
The hurricane overshadowed the report from the American Petroleum Institute (API), which indicated that U.S. inventories decreased by as much as 5.78 million barrels last week, signaling a gradual reduction in the surplus supply in the U.S. market. The figures do not include the impact of the tropical storm.
Attention is now turning to official data that will be released during the day.
Separately, the Organization of the Petroleum Exporting Countries (OPEC) announced today that the price of a barrel of its reference basket of oil was $49.51 on Tuesday, meaning it was almost unchanged from the previous trading day.
