Oil futures edged up and gas futures extended their gains on Thursday as the disruption from Hurricane Harvey complicated the flow of U.S. crude exports.
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As Harvey moved across the Southeast U.S. and weakened to a tropical depression, investors were also eyeing the potential for future disruption from a fresh storm brewing in the Atlantic Ocean. The storm, named Irma, is currently projected to pass over the U.S. East Coast.
Brent crude, the global oil benchmark, rose 0.20% to $50.96 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.35% at $46.12 a barrel.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 2.29% to $1.68 a gallon. ICE gasoil changed hands at $491.75 a metric ton, down $3.75 from the previous settlement.
Brent prices have fallen 1.79% in the past week due to fears of an inventory build up as a result of the storm. But further supply disruptions have since provided support for crude. The oil market is also missing about 350 thousand barrels a day of oil supply from Libya due to pipeline disruptions there caused by a wage dispute among oil workers.
Moreover, since Harvey made landfall on Friday, the storm has knocked out about 4 million barrels a day of refinery activity around Houston and Texas, which has largely halted the processing of oil and slowed the flow of oil products coming out of the refining facilities to a trickle, analysts said.
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"When refineries are not able to run on the U.S. coast, WTI light sweet crude is accumulating in Cushing, pushing down the price there," said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "But it also means less light sweet crude is flowing into the market, which is supportive."
The storm has been a boon for the value of refined products. The profit margin on refining jet fuel in the European Union has soared.
Before the storm, U.S. inventories were running at maximum capacity to meet record gasoline demand of 9.846 million barrels a day "narrowly above the previous all-time high set just four weeks ago," said Paul Horsnell, the head of commodity research at Standard Chartered.
"The shutdown of most Gulf Coast refining capacity is likely to remove the remaining surplus product inventories quickly."
Traders are poised to make a profit from importing crude products from Europe to supply the U.S.
Analysts estimate that about 40 oil tankers have been contracted to carry oil products from Europe to compensate for lost production in the U.S. form the Gulf of Mexico refinery shutdowns.
Analysts are watching another storm on the horizon that may further disrupt U.S. exports that stood at between 5 million to 6 million barrels a day of crude and petroleum products before the storm.
"We have been warning about the next tropical development," said Olivier Jakob, an analyst at research group Petromatrix. "Tropical storm Irma...should gain hurricane status before the weekend."
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(END) Dow Jones Newswires
August 31, 2017 08:12 ET (12:12 GMT)