Oil ticks higher, gasoline slides as refineries return after Harvey

Oil ticks higher, gasoline slides as refineries return after Harvey

The demand for energy resources remains lower, amid slow recovery of refining capacities at refineries in the USA after the Hurricane Harvey.

In line with a small rise in the number of oil rigs, U.S. crude oil production continues to increase, with average production averaging 9.530 million barrels per day for the week ending August 25, up just slightly from 9.528 million bpd the week prior. USA crude West Texas Intermediate was at $47.29 per barrel, up by 0.13 per cent. In global oil markets, Brent crude futures dipped 19 cents to United States dollars 53.19 a barrel. While US Gulf Coast refiners are working to restore operations to normal, traders are also watching the approaching stronger Hurricane Irma.

Another Hurricane - Irma - strengthened on Tuesday into a Category 5 hurricane, the most powerful storm on the Saffir-Simpson scale with sustained winds of over 157 miles per hour.

There is also another tropical storm on Irma's heels in the Atlantic, and another one active in the Gulf of Mexico.

Oil refineries, pipelines and shipping channels across Texas and Louisiana after storm system Harvey made landfall in the heart of the USA energy industry more than a week ago.

Approximately 4.5 million barrels of oil have been released from the Strategic Petroleum Reserve (SPR) in response to Hurricane Harvey's effect on national gasoline availability. At its peak, Harvey shuttered 27% of USA processing capacity. But Reuters reported Saturday that companies were beginning to restart some of their refineries, including Exxon Mobil's Baytown, Texas, facility that is the second-biggest oil refinery in the country, capable of producing 560,500 barrels per day.

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Elsewhere the EIA downgraded its monthly crude oil production estimate for June to 9.1mn barrels/day, some 241,000 b/d below what the weekly estimates showed. Another million barrels had already been approved for shipment, the report said.

But as trading for the third quarter entered its final month, some early jitters over the potential long-term disruptions to energy supplies from the worst Texas storm in over 50 years fizzled.

Gasoline for October delivery fell seven cents, or 4 percent, to $1.68 a gallon, after rallying last week. While the now-expired September RBOB gasoline futures contract surged by nearly one-third in just four days, crude oil traded lower in response to the dramatic loss of demand.

In its latest incident report, the U.S. Energy Department said six refineries were still shut down, an improvement from the dozen or so closed at the peak of the storm.

Yet while oil import dependency has plunged from 60 percent in 2005 to just 25 percent today, the refining of domestically produced oil has concentrated even more in the Gulf region.