As refineries along the Gulf Coast slowly resume normal operations, there was no surprise in this week’s EIA inventory report: a build of 4.6 million barrels of crude oil. The figure was higher than the 4.022 million barrels that analysts expected after the shutdown of a large portion of the United States’ refining capacity because of Hurricane Harvey.
That US crude oil inventories would increase in the wake of Hurricane Harvey was largely anticipated, with some saying as much as 40-60 million barrels could be added to inventory while shuttered refineries struggle to come back online.
According to Reuters, as of yesterday, about 3.8 million bpd in refining capacity remained shut down, representing a fifth of the US total. This has provided a support for crude oil prices, as have reports of another three storms brewing in the area of the Gulf, with the potential of growing to hurricanes, causing further shutdowns and damage.
The EIA reported that refinery runs last week averaged 14.5 million barrels of crude, a decline from 17.7 million bpd the week before, when the authority also reported a 5.4-million-barrel draw in crude oil inventories.
Gasoline production averaged 9.5 million barrels, compared with 10.6 million bpd a week earlier, with inventories falling by 3.2 million barrels in the week to September 1.
The capacity shutdowns have done international oil prices good and now news of more possible supply disruptions are supporting them, too. WTI has been climbing steadily towards US$50 and Brent has inched closer to US$55 a barrel – a price level past seen at the beginning of the year, when optimism was rife that OPEC’s deal would quickly take care of excess global supply.
Given that some analysts, including Goldman Sachs’ Damien Courvalin, believe that the effects of Harvey on demand and supply will linger for a few weeks, chances are that prices will stay where they are until the dust settles.
By Irina Slav for Oilprice.com
