Oil Rises Ahead of Expected Fall in U.S. Gasoline Stocks

By Sarah McFarlane Features Dow Jones Newswires

Oil prices edged higher Thursday ahead of U.S. stocks data, which is expected to show a sharp fall in gasoline inventories after tropical storm Harvey caused refinery shutdowns in Texas.

Continue Reading Below

Brent crude, the global oil benchmark, rose 0.8% to $54.63 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.2% at $49.24 a barrel.

Oil prices have climbed this week as some U.S. Gulf Coast refineries restarted operations, boosting demand for crude, after Harvey brought a chunk of the country's refining industry to a halt at the end of August.

"One of the impacts of the hurricane and the related refinery shutdowns is a fall in product inventories and a rise in crude stocks," said Tamas Varga at brokerage PVM.

Traders and analysts surveyed by The Wall Street Journal expect on average to see U.S. gasoline stockpiles to have fallen by 5.7 million barrels and distillate stockpiles to be down 3.5 million barrels in the week ended Sept. 1.

Oil inventories are expected to have risen by 5 million barrels due to the slowdown in demand caused by disruptions to refineries.

Continue Reading Below

Industry group the American Petroleum Institute reported Wednesday that U.S. crude supplies rose 2.8 million barrels for the week ended Sept. 1, but that gasoline stockpiles fell by 2.5 million barrels.

Investors were also monitoring the development of tropical storm Irma which is heading toward Florida, a state which unlike Texas doesn't have refineries, but where oil demand could be affected.

"The issue in relation to the oil market isn't so much the ability to produce or refine, but simply the possibility that consumer behavior at the pump will veer toward precautionary buying, I wouldn't be surprised if you have long queues at gas stations and the possible development of shortages in some areas," said Harry Tchilinguirian, head of commodity strategy at BNP Paribas.

Analysts noted the official end of the U.S. driving season on Sept. 4 marks the seasonal drop-off in gasoline demand which could put downward pressure on oil prices.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.2% to $1.68 a gallon. ICE gas oil changed hands at $523.75 a metric ton, up $3.75 from the previous settlement.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

Oil prices settled down slightly Thursday, paring earlier losses after U.S. data showed that oil stockpiles rose and gasoline stockpiles fell after Hurricane Harvey's recent hit on the Gulf Coast, as analysts had anticipated.

The U.S. Energy Information Administration reported that inventories of crude oil rose by 4.6 million barrels as refineries were forced to cut back sharply. That is largely what analysts were expecting after Harvey hit Texas as a Category 4 hurricane and lingered over the area, causing unprecedented flooding that forced several refiners to shut down fuel-making operations.

U.S. crude futures fell 7 cents, or 0.14% to settle at $49.09 a barrel on the New York Mercantile Exchange, snapping a four-session winning streak. Brent crude rose 29 cents, or 0.54%, to $54.49 a barrel on ICE Futures Europe.

"It begins to reflect the impact of Hurricane Harvey on Gulf Coast refiners," said Andy Lipow, president of Lipow Oil Associates.

The EIA data showed that refinery utilization fell by nearly 17 percentage points to 79.7% of capacity.

Still, analysts said Thursday's data likely isn't the final word on Harvey's impact. The builds in oil stocks could continue in the coming weeks, Mr. Lipow said. "There's still a significant amount of refining capacity in the midst of starting up," he said.

Gasoline stockpiles fell by 3.2 million barrels, compared with the 5.7 million barrel drop that analysts surveyed by The Wall Street Journal were expecting. That may be limiting crude's gains, but Mr. Lipow said he expects sharper draws may be reflected in data in the coming weeks.

Gasoline futures fell 1.23 cents, or 0.74%, to $1.661 a gallon. Diesel futures rose 2.66 cents, or 1.51% to $1.7861 a gallon.

Oil prices have climbed much of this week as some U.S. Gulf Coast refineries restarted operations, boosting demand for crude, after Harvey brought a chunk of the country's refining industry to a halt at the end of August.

"After the hurricane rolled through, we didn't get lots of alarms that refineries were damaged," said Gene McGillian, research manager at Tradition Energy. "The market has since turned; we're back where we were before the storm."

That means investors are once again looking at fuel demand, trying to determine how much of the recent uptick was seasonal and whether to expect that crude stockpiles will once again start falling when the fallout from Harvey is sorted out.

Investors were also monitoring the development of tropical storm Irma heading toward Florida, a state that unlike Texas doesn't have refineries, but where oil demand could be affected.

"The issue in relation to the oil market is not so much the ability to produce or refine, but simply the possibility that consumer behavior at the pump will veer toward precautionary buying, I wouldn't be surprised if you have long queues at gas stations and the possible development of shortages in some areas," said Harry Tchilinguirian, head of commodity strategy at BNP Paribas.

Analysts noted the official end of the U.S. driving season on Monday marks the seasonal drop-off in gasoline demand, which could put downward pressure on oil prices.

Write to Alison Sider at alison.sider@wsj.com and Sarah McFarlane at sarah.mcfarlane@wsj.com

(END) Dow Jones Newswires

September 07, 2017 16:45 ET (20:45 GMT)