Oil up on OPEC output decline; United States refinery restarts

Gladys Abbott
September 13, 2017

Nevertheless, the advent of Irma raised the possibility of a particularly destructive hurricane season this year, "with potential implications for the oil market", but OPEC promised to do its bit for the "stability and security" of the oil market.

The decrease was primarily due to severe production declines in Libya towards the end of the month.

The near term action in oil prices will depend on how prolonged will be the impact of Hurricane Harvey on United States oil infrastructure.

Official data from the Energy Information Administration will be released Wednesday. As of 2:00 p.m. EDT Tuesday, the government said that four refineries in the Gulf Coast were still closed because of issues associated with Harvey, representing about 4 percent of the total USA refining capacity. "There is no refinery capacity in the region therefore the main concern lies in the hit of oil demand". For Irma, the US government eased some restrictions so that foreign-flagged vessels could help offset the market pressures in Florida and the surrounding areas.

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Potential price support from the decline in gasoline inventories was offset by the higher than expected headline build and sharp recovery in production.

The Organization of Petroleum Exporting Countries and other producers, including Russian Federation, are reducing crude output by about 1.8 million barrels per day until next March in a bid to reduce inventories and support prices, Reuters reported.

The differential "can be explained in part by lower demand for US crude oil in the next few weeks, as some refineries on the [Gulf Coast] will remain closed...while demand is also likely to suffer as a result of the devastation caused by Hurricane Irma in Florida", according to analysts at Commerzbank. The OPEC now sees demand growth of 1.4 mbpd this year while IEA sees growth at 1.5 mbpd. Saudi suggested that it will export 6.6 mbpd in August, down from 7.1 mbpd in July.

"The drop in USA oil refining is also to be offset by higher processing at other nations, so worries over a substantial cut in crude oil demand are fading". In this article, we review the compliance among OPEC members. For 2018, the world will need 32.4 million bpd of crude from OPEC.

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