How Hurricane Irma Could Impact Crude Oil Prices and Production

How Hurricane Irma Could Impact Crude Oil Prices and Production

How Hurricane Irma Could Impact Crude Oil Prices and Production

Oil prices rose on Friday as USA crude production was hit harder by Hurricane Harvey than expected, with the even bigger storm Irma heading for Florida and threatening to cause more disruption to the petroleum industry.

Irma, the second major hurricane to approach the United States in two weeks was forecast to slam southern Florida on Sunday. In the wake of Hurricane Harvey, idle refineries littered the Gulf shores, but they are coming back online almost as quickly as they fell off. US refiners restarting after Tropical Storm Harvey, however, gains were limited by new disruptions caused by Hurricane Irma. They have been trying to return to work, but the process isn't straightforward because they have to be able to get their oil to market. The price for Brent crude oil, the global benchmark, was down 0.67 percent to $53.42 per barrel.

Andy Lipow, president of Lipow Oil Associates, told CNBC that while Irma is not a direct threat to oil production or refining facilities, it is still cause for concern: "the biggest issue we face is the storage terminal and distribution system in Florida, which consumes about 500,000 barrels per day of gasoline and receives about 90 percent of it by vessel".

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

Meanwhile, futures, the benchmark for oil prices outside the US, tacked on 27 cents, or roughly 0.5%, to $54.05 a barrel.

Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also impacted shipping. Gasoline prices have soared as drivers filled up their tanks, but crude oil prices have fallen because producers have had fewer places to sell their product.

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Trump will consider the already-drafted executive action "if we don't get those additional sanctions at the UN", he added. The official warned that Pyongyang should not "underestimate American will to protect ourselves and our allies".

The Department of Homeland Security said it is waiving the Jones Act for a week, which will allow fuel to be shipped by foreign-flagged vessels instead of only USA -flagged vessels to help ensure that emergency responders during Irma and in the wake of Harvey have enough motor fuel.

"Oil and gas infrastructure in the U.S. Gulf Coast region continues to come back online post hurricane Harvey, with 1.0 million [barrels a day] of refining capacity still fully shut down, and 2.7 million b/d of capacity in the process of restarting", Jenna Delaney, senior oil analyst at PIRA Energy, an analytics unit of S&P Global Platts, said in an email update late Thursday.

Drillers cut three oil rigs in the week to September 8, bringing the total down to 756, the least since June.

Money managers raised their net long U.S. crude futures and options positions in the week to September 5, the U.S. Commodity Futures Trading Commission (CFTC) said.

Futures were little changed in NY, up 3.7% for the week. Support at $47.07 was previous resistance that held price action lower on two attempts in July.

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