Oil Drops On Concerns Irma Could Affect US Demand

Faith Castro
September 12, 2017

Monday's gains came as Hurricane Irma struck the USA southeast with less force than once feared, easing worries that energy demand would be hit hard.

Irma's hit in demand will partly offset the Gulf Coast's interrupted refinery runs, which are taking longer than expected to recover, according to the bank.

"We believe that Irma will have a negative impact on oil demand but not on oil production or processing", Goldman Sachs analysts reported in a note.

Investors were also watching closely for the storms' impact on inventories.

"A similar production level is also anticipated for September", the Saudi ministry said.

Brent crude oil futures were down 13 cents, or 0.2 percent, at $53.65 a barrel at 12:17 p.m. (1617 GMT) while U.S. West Texas Intermediate crude rose by 59 cents, or over 1 percent, to $48.07. We have factored in 40% current utilisation rates at the country's largest refinery in the process of restarting since late last week, Motiva's 603,000 b/d plant at Port Arthur, and partial rates at a 270,000 b/d CDU at Shell's 340,000 b/d Deer Park refinery, which began the process of resuming operations over the past weekend.

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Approximately 5.8 million Florida homes and businesses lost power due to Hurricane Irma on Sunday after millions were ordered to evacuate prior to the storm.

"The oil market reacted to the Saudi talks", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

The deal agreed late a year ago to reduce output by about 1.8 million bpd until March 2018 helped to keep prices as high as $58 a barrel in January, but they have since sagged as global stocks have not fallen as quickly as expected.

Saudi Arabian Energy Minister Khalid Al-Falih agreed with his Venezuelan and Kazakh counterparts to leave all options open in their push to re-balance world oil markets, including the possible extension of output cuts beyond next March. The producers are seeking to strengthen compliance with the cuts accord they reached a year ago.

Saudi Arabia and Venezuela, both members of OPEC, agreed to consider prolonging production cuts "beyond the first quarter of 2018, if needed", the Saudi ministry said in one of the statements.

Falih and the Minister of Energy of the United Arab Emirates, Suhail al-Mazroui, held a meeting in Astana, at which both men discussed oil market dynamics and "expressed satisfaction with improving market fundamentals", the statement said.

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