Published: Tue, September 12, 2017
Money | By Armando Alvarado

US Crude Futures Drop as Hurricane Irma Approaches Florida

US Crude Futures Drop as Hurricane Irma Approaches Florida

Hurricane Irma is expected by Goldman Sachs to have a negative impact on oil demand, but the firm said it sees a larger hit to oil demand from hurricane Harvey, "given the large concentration of energy-intensive petrochemical activity in its path".

On the eve of Irma's arrival in Florida and catastrophic wind speeds of 260-295 kilometres per hour expected, the question is: to what extent will the storm impact the energy industry?

OPEC's secretary-general Mohammad Barkindo said on Monday the supply cut deal was expected to help the global oil market rebalance and strong demand could further reduce oil inventories.

Irma, however, was not expected to affect supply as it was headed away from US oil production in the Gulf. This was the largest single day loss since July 5.

It comes on the heels of Hurricane Harvey, which struck the United States oil hub of Texas two weeks ago, knocking out a quarter of the nation's refineries, many of which are now restarting operations.

According to the U.S. Energy Information Administration, U.S. weekly crude stocks increased 4.6 million barrels the week-ending September 1, topping analysts' forecast for a 4.0-million-barrel build in a Reuters poll.

USA oil output fell by nearly 8 per cent, from 9.5 million barrels per day (bpd) to 8.8 million bpd, according to the Energy Information Administration.

Irma recovery could require 11M meals, 24000 tarps and more
With expected winds of about 100 miles per hour, residents were advised to prepare for the worst by Tampa's Mayor, Bob Buckhorn . The company said it has assembled the largest pre-storm workforce in US history , with more than 16,000 people ready to respond.

WTI futures dropped more than 3% on Friday even as the number of oil rigs operating in the US fell by three to 756, still remaining near the highest level since April 10, 2015, according to data from energy services firm Baker Hughes (BHGE), which tracked the seven-day period ended September 8.

Irma has knocked out power to 4.5 million customers, paralyzed tanker traffic and shut about 6,000 gasoline stations.

Brent ended the week up 1.9 percent while US crude was up 0.4 percent, paring most of its earlier weekly gains on worries on the continued impact of hurricanes on demand and supply.

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.

But as the refinery sector gradually recovers, so is its crude processing.

Saudi Arabia and Venezuela agreed to leave rebalancing options open, including on the possible extension of efforts to rebalance the market beyond the first quarter of 2018, the Saudi energy ministry said in emailed comments after a meeting between the countries' energy ministers in Astana on Saturday. The US Department of the Interior's Bureau of Safety and Environmental Enforcement said that roughly 13.5 percent of oil production in the Gulf of Mexico was also shut in on August 31.

Harvey's impact was also felt in oil production.

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