Oil slides as Irma heads for Florida, threatening demand

Markets Reuters

(REUTERS/Rick Wilking)

Oil prices slid on Friday, with U.S. crude down more than 3 percent on worries that commerce and energy demand in Florida and the Southeast would be hit hard as Hurricane Irma, one of the most powerful storms in a century, drove toward the region.

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Irma, the second major hurricane to approach the United States in two weeks, has already killed 14 and destroyed islands in the Caribbean. Its predecessor, Harvey, shut a quarter of U.S. refineries and 8 percent of U.S. oil production, with crude prices slumping as widespread refinery outages sharply reduced demand for crude.

It will take weeks for the U.S. petroleum industry to return to full capacity, analysts said. In the case of Irma, analysts are more worried that devastation wrought by the storm could sharply reduce demand for energy.

U.S. light crude oil was down $1.53 or 3.12 percent at $47.56 a barrel by 1:47 p.m. EDT (1747 GMT). Brent crude was down 67 cents or 1.2 percent to $53.82 a barrel after reaching its highest level since April at $54.80.

Both benchmarks remained on track for slight weekly gains.

"Hurricanes can have a lasting effect on refinery and industry demand," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

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U.S. oil output fell almost 8 percent because of Harvey, from 9.5 million barrels per day (bpd) to 8.8 million bpd, according to the Energy Information Administration (EIA). <C-OUT-T-EIA>

But Irma is headed away from the heart of U.S. oil production.

"Irma looks like it will miss the key Gulf areas, and we're more worried about shale," said Mark Watkins, regional investment manager at U.S. Bank.

Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have hit shipping.

"Imports (of oil) to the U.S. Gulf Coast fell to levels not seen since the 1990s," ANZ bank said.

Hurricane Irma hit the Dominican Republic and Haiti on Friday, heading for Cuba and the Bahamas. It was predicted to reach Florida by Sunday.

The U.S. National Hurricane Center (NHC) said Irma was a Category 5 hurricane, with wind speeds of 160-185 miles per hours.

Hurricane Jose is heading for the Caribbean Leeward islands, which have just been devastated by Irma.

U.S. energy firms cut oil rigs for a third time in the past four weeks as a 14-month drilling recovery stalled, with energy firms reducing spending plans in response to falling crude prices.

Drillers cut three oil rigs in the week to Sept. 8, bringing the total count down to 756 energy services firm Baker Hughes energy services firm said in its Friday report.

 

(Reporting by Julia Simon in New York, Additional reporting by Dmitry Zhdannikov and Christopher Johnson in London, and Henning Gloystein in Singapore; Editing by Greg Mahlich and David Gregorio)

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