Oil prices fall as market assesses hurricane damage

Oil prices fall as market assesses hurricane damage

Oil prices fall as market assesses hurricane damage

Refinery shutdowns from the storm helped push U.S. gasoline prices to $1.7799 per gallon on Monday, the most since 2015, although they receded slightly to $1.7342 per gallon by 0648 GMT on Tuesday. November Brent crude on London's ICE Futures exchange inched lower by 2 cents, or less than 0.1%, to $51.64 a barrel.

Harvey - and the massive flooding it's brought - are moving along the Gulf of Mexico coastline Monday morning, lingering close to the shore through Tuesday and moving east toward Louisiana. According to Phil Flynn of The Price Futures Group, even if some of the refineries resume operations, it would be hard if not impossible to move their product.

Crude prices slipped lower on Tuesday as the market grappled with the shutdown of 13 percent of refining capacity in the United States after a hurricane ripped through the heart of the country's oil industry.

Analysts said aside from perceived USA fuel shortages that were helping gasoline rally, demand for refined products across the world were also picking up as refineries in Europe and Asia expanded production to replace some of the lost US supply.

The risk is that this onshore production takes longer to return than the market may expect, given the apparent widespread damage to infrastructure from flooding in the region and the length of time it may take floodwaters to recede.

The U.S. National Hurricane Center said floods caused by Tropical Storm Harvey were expected spread from Texas eastward to Louisiana, home to roughly 3.3 million bpd.

Remnants of Harvey expected to move into the Carolinas late this week
Models are suggesting Harvey's remnants will linger through Saturday evening with scattered showers and storms likely. After Harvey moves out, the rain threat diminishes, though another round of showers may be possible next week.

Over the last ten weeks, according to the API, crude oil inventories in the United States have shed more than 46 million barrels.

This means that trade flows will be disrupted, with some cargoes likely to be diverted. The impact of Hurricane Harvey was again the main focus with prices undermined due to reports of further refineries either suspending operations or running at reduced capacity.

A loss of USA exports of light crude may stoke demand for similar grades from suppliers such as Angola and Nigeria, while shippers of heavier crudes may have to offer discounts if cargoes headed for the United States have to be diverted.

In a filing with the Texas Commission on Environmental Quality, regional refiner Flint Hills Resources said it was in the process of restarting its West Refinery already.

While Harvey may have a short-term impact on global crude and product markets, the question is how quickly USA production and exports return to normal.

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