Oil prices advanced Friday in volatile trading, as investors tried to gauge the impact of a hurricane hurtling toward the Texas coast.
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U.S. crude futures rose 26 cents, or 0.55%, to $47.69 a barrel on the New York Mercantile Exchange. Brent, the global benchmark rose 19 cents, or 0.37% to $52.15 a barrel on ICE Futures Europe.
Hurricane Harvey is gaining strength and is expected to reach the Texas coastline by Friday evening or Saturday. The storm is the first hurricane to hit Texas since 2008 and is expected to dump 15 to 25 inches of rain on the region.
Oil's move higher reverses some of Thursday's 2% loss, which was driven by concerns that refiners in the storm's path would halt operations and stop churning as much crude into fuel.
"This is a reaction to the overreaction yesterday," Steve Sawyer, an analyst at consultancy Facts Global Energy, said of the market shift Friday morning.
Meanwhile fuel prices largely held on to Thursday's gains. Gasoline futures rose 1.5 cents, or 0.9% to $1.6791 a gallon. Diesel futures edged up 0.2 cent, or 0.12%, to $1.6230 a gallon.
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Harvey is hitting in a transformed energy landscape: Previous storms that disrupted operations at the offshore platforms in the Gulf of Mexico caused oil prices to spike. This time around, offshore production is a smaller factor in total U.S. oil output.
The bigger concern for market participants now is that interruptions in refining will cause fuel shortages. The storm's winding and uncertain path is raising questions about how long refiners may have to stay offline next week. Plants in the Corpus Christi area have started to shut down in anticipation of the storm. The effect on the Houston region, where there is an even larger concentration of fuel-making plants, is still unclear.
"You're not worried so much about crude production. The refineries are the big concern right now," said Michael Hiley, a trader at LPS Futures LLC. "You're worried about wind damage, flood damage, power outages and the workforce being able to get to the refineries."
Donald Morton, senior vice present at Herbert J. Sims & Co., who runs an energy trading desk, said the difference between fuel and oil prices, known as the "crack spread" had gotten so wide that traders were beginning to reverse their bets, selling products like gasoline and diesel and buying crude.
"Crude oil was going to be dragged along eventually -- the crack spreads can't continue to run the farm," he said.
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(END) Dow Jones Newswires
August 25, 2017 12:24 ET (16:24 GMT)