Oil prices are rising on bullish supply data from the American Petroleum Institute (API) and talk that the joint OPEC/non-OPEC Ministerial Monitoring Committee (JMMC) on Friday night set the stage for an extension of the existing production cut agreement as compliance with the current deal is starting to improve.
Oil prices are rising on hopes that Hurricane Jose will not do any damage to East Coast refiners that are running hot and heavy to make up for lost supply from Gulf Coast refiners that were hit hard by Hurricane Harvey. Refiners are already having success with getting gasoline prices to fall but there is more work ahead of them.
While Florida and the rest of the Gulf Coast deal with the aftermath of Hurricane Harvey and Irma and the energy markets assess the short-term demand destruction, in the bigger picture for energy, we are getting very bullish data in supply versus demand.
Almost all global markets seem to be transfixed on Hurricane Irma, which could wallop Florida with an unprecedented and merciless blow and have an impact on many lives as well in the U.S. and global economy. Fox News reported that France’s interior minister on Thursday said the Category 5 storm killed at least eight and injured 23 on St. Martin. Irma blacked out much of Puerto Rico and is headed toward Haiti and the Dominican Republic.
Crude oil prices are still reacting to the post Hurricane Harvey recovery efforts. Crude prices surged as refiners start to come back online and nervous buyers in Asia start to buy up oil supply. Reuters reported that the spread between Brent and WTI is causing some big Asian buying as refinery shutdowns in the aftermath of Harvey pushed the spread between West Texas Intermediate crude and Brent crude to the widest in two years at nearly $6 a barrel.
The U.S. refineries are coming back and believe it or not, so is oil production and gas production. Last week Valero Energy restarted two Galveston refineries and are now back to normal production rates. Yet, just as the industry starts to recover, more storms are going to create havoc.
RBOB gasoline futures are on the rise for the seventh day in a row as it has been confirmed that the Colonial Pipeline is running at reduced rates, raising the real possibility of gas and diesel and even jet fuel shortages. Colonial Pipeline Co. said Tropical Storm Harvey affected its Houston origin, which includes Pasadena, Houston, and Cedar Bayou.
The Gulf Coast and Houston are in our prayers as they face unprecedented challenges in the aftermath of Hurricane Harvey. Hurricane Harvey, the strongest Texas hurricane in 50 years, brought record rainfall and unprecedented flooding. It may take years for the area to recover and it is going to be a historic challenge for the U.S. energy sector. The storm has shut about 15% of U.S. refining, cutting fuel-making capacity output by an estimated 2.2-2.7 million barrels a day.
The crude oil trade has been totally eclipsed by the focus on the so-called glut of crude even as the oil market, due to massive supply withdrawals, is the tightest it’s been in years when you compare it to record demand. The forward demand cover on oil supply in the United States has fallen to 26.7 days of supply, which is the lowest since Oct. 2, 2015.