MOSCOW (MRC) - US crude oil prices are on track to post the steepest monthly losses in more than a year on Thursday as concerns spread over falling demand in the world's top oil-consuming country after storm Harvey knocked out almost a quarter of its refineries, said Hydrocarbonprocessing.
But prices rallied in the oil products markets, with US gasoline futures hitting a two-year high above USD2 a gallon, buoyed by fears of a fuel shortage just days ahead of the Labor Day weekend that typically sees a surge in driving.
Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralysed at least 4.4 MMbpd of refining capacity, according to company reports and Reuters estimates. The country's biggest fuel transport system, the Colonial Pipeline, also said it would shut its main diesel, jet fuel and gasoline lines because of outages at its supply points.
Traders from Europe to Asia were scrambling to fix fuel cargoes to the United States, with price reporting agency Argus registering a record monthly trade volume of European gasoline barges. Analysts at Goldman Sachs and Stifel said infrastructure outages could last several months, although it was difficult to estimate the exact damage.
"We still expect production growth to resume, however Harvey probably pushed it out a couple of months or maybe even a quarter," said analysts at Stifel. Crude markets remained weak after sharp losses in the previous session. The closure of so many US refineries has resulted in a slump in demand for the most important feedstock for the petroleum industry.
US West Texas Intermediate (WTI) crude futures were set to close the month down 8%, their steepest monthly loss since July 2016. They traded at USD46.09 a barrel at 1201 GMT, up 13 cents on the day, after falling more than 1 percent on Wednesday.
International benchmark Brent crude was at USD51.22, up 36 cents from the previous session, when the contract fell more than 2 percent. "Refineries outside the affected area may delay maintenance to benefit from high processing margins," said Carsten Fritsch, oil analyst at Commerzbank.
"Hence, the negative impact on crude oil demand and oil product supply might be less severe than feared." U.S. crude and product stocks, typically watched closely by oil investors as they reflect market balancing, were largely ignored this week.
U.S. commercial crude stocks fell by 5.39 MMb last week to 457.77 MMb, the US Energy Information Administration said on Wednesday. That's down 14.5% from record levels reached in March.
MRC