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Harvey aftermath: US oil prices may see worst monthly fall in over a year

Hurricane said to have knocked out almost a quarter of nation's refineries

Reuters  |  Amsterdam 

US oil prices, oil, Hurricane Harvey
An oil tank damaged by Hurricane Harvey is seen near Seadrift, Texas, US on August 26, 2017. (Photo: Reuters)

crude prices are on track to post the steepest monthly losses in more than a year on Thursday as concerns spread over falling demand in the world's top oil-consuming country after storm Harvey knocked out almost a quarter of its refineries.

But prices rallied in the products markets, with gasoline futures hitting a two-year high above $2 a gallon, buoyed by fears of a fuel shortage just days ahead of the Labor Day weekend that typically sees a surge in driving.

Harvey, which brought record flooding to the heartland of and killed at least 35 people, has paralysed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

Traders from to Asia were scrambling to fix fuel cargoes to the United States.

said it could take several months to restore all production.

"While no two natural disasters are similar, the precedent of Rita-Katrina would suggest that 10 percent of the ... currently offline capacity could remain unavailable for several months," the investment bank said.

Crude markets remained weak after sharp losses in the previous session. The closure of so many refineries has resulted in a slump in demand for the most important feedstock for the petroleum industry.

West Intermediate (WTI) crude futures were set to close the month down 8 percent, their steepest monthly loss since July 2016. They traded at $46.12 a barrel at 0849 GMT, up 16 cents on the day, after falling more than 1 percent on Wednesday.

benchmark Brent crude was at $50.86, unchanged from the previous day, when the contract fell more than 2 percent.

"The temporary closure of refineries is a major dent to the United States crude demand and is weighing on both Brent and WTI prices," said.

crude and product stocks, typically watched closely by investors as they reflect market balancing, were largely ignored this week.

commercial crude stocks fell by 5.39 million barrels last week to 457.77 million barrels, the Energy Information Administration said on Wednesday.

That's down 14.5 percent from record levels reached in March.

At the same time, the amount of crude entered into refineries reached a record high of 17.73 million bpd, the data showed, a number that is expected to have dropped dramatically this week due to infrastructure closures.

Analysts at JBC Energy said that figure could slip to as low as 15-16 million bpd.

First Published: Thu, August 31 2017. 16:44 IST