Economy

Oil prices decline on Hurricane Irma

Oil prices decline on Hurricane Irma”

He added that if the hurricane drifts to the west side of the state, "then we start impacting natural gas and oil production off the coasts of Alabama and Louisiana". It has killed 14 people so far, after tearing through the Dominican Republic and Haiti, and was due in Cuba and the Bahamas before an anticipated weekend landfall in Florida.

If last Friday's sell-off is any indication, crude oil prices are likely to be under pressure this week as investors react to the impact of Hurricane Irma on near-term demand for gasoline and crude oil.

Irma knocked out power to almost 5,8 million Florida homes and businesses on Sunday after millions were told to evacuate ahead of the storm. Jose, another storm has reached Category 4 status over the Atlantic Ocean, while Hurricane Katia is threatening to barrel into Mexico.

But even if Irma doesn't disrupt US operations too severely, that doesn't mean there aren't other issues to worry about: it seems analysts are now concerned about the quicker than expected growth of the Liquefied Natural Gas (LNG) industry, with supplies said to be on course to increase by 50 percent between 2014 and 2021.

The EIA (U.S. Energy Information Administration) estimates that USA crude oil production fell 7.8% or 749,000 bpd (barrels per day) to 8.8 MMbpd between August 25 and September 1.

Finally, energy services firm Baker Hughes reported that US energy firms cut oil rigs for a third time in the past four weeks as the 14-month drilling recovery stalled with energy firms reducing spending plans in response to recent crude price declines.

USA crude settled down $1.61, or 3.3 percent, at $47.48 a barrel. It is poised for a weekly loss of more than 5%, after rising 4.9% last week 4.9% amid fears of a gasoline shortage in America (http://business.gasbuddy.com/hurricane-irma-live-updates-fuel-availability-station-outages/).

RBC said it expected the price for WTI would be around $49.30 per barrel and Brent is expected to average $52.50 per barrel for the year. The global benchmark crude traded at a premium of $5.26 to November WTI. The difference between the two crude benchmarks is a key trade for many speculators.

Currently, Saudi Arabia is gathering support among the OPEC and some non-OPEC countries to extend the duration of the output-cut agreement because it is becoming evident that the oil market may not rebalance by the end of Q1 2018, senior energy analyst at Interfax Energy's Global Gas Analytics (GGA) in London Abhishek Kumar believes.

The capacity shutdowns have done global oil prices good and now news of more possible supply disruptions are supporting them, too.

The longer-term focus, however, was on a possible extension to the 15-month production pact between members of the Organisation of the Petroleum Exporting Countries and non-OPEC producers including Russian Federation. The Saudi commitment to OPEC cuts is 486,000 bpd. According to the latest estimate from commodity pricing group S&P Global Platts, production in August from both countries combined was about a half million barrels per day above the level from October, the month used by OPEC as a peg to gauge cuts and quotas. While it should a point, it looks as if the major infrastructure of the crude oil supply chain should be spared most of the damage. Allocations to customers in Europe will drop by 70,000 bpd.

Even so, some cautioned against betting too hard on a continued Brent rally versus WTI. "What we have here is an unique hurricane situation that's giving Brent a pop, which otherwise isn't deserved".



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