Friday, 22 September, 2017

Oil price gains on anticipated increase in demand

US Hurricanes Affecting Oil Prices, Saudi Could Cut Output Hurricanes Harvey and Irma to support crude oil prices; buy on dips
Dexter Carr | 14 September, 2017, 00:47

Oil inventories are expected to have increased because of the slowdown in demand caused by disruptions to refineries from August's Hurricane Harvey.

The price, which was also over $54 per barrel the previous day was said to have stabilised at that level because of the near balance of demand and supply in the market. Estimates from market intelligence firm Genscape showed an inventory growth of 1.2 million barrels in Cushing last week, said market sources who saw that data on Monday.

The EIA expects net petroleum product exports to average 1.1 MMbbl/d in September, down from an average of 2.9 MMbb/d in the first eight months of 2017. The hurricane forced refineries across the US Gulf Coast to shut down impacting almost 3.3 mbpd of refining capacity as per the EIA data released last week.

In a note Monday, however, analysts at Goldman Sachs said the negative impact on oil demand from Irma will be smaller than Harvey, which made landfall on the Texas coast on August 25. Interestingly, pump prices rose by a higher absolute amount per gallon in Texas (40 cents per gallon) and Houston (35 cents per gallon), but the averages for Texas ($2.56 a gallon) and Houston ($2.43 a gallon) remained lower than the national average. We also saw a reduction in number of oil rigs which will further be price supportive.

Opec boosted its estimates for the amount of crude it will need to supply next year by 400 000 barrels a day to 32.8 million a day on increased demand projections for Europe and China.

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"Global economic growth momentum has gained traction lately and has become more balanced, with all major economies now showing positive growth this year, a trend that is forecast to continue into 2018", OPEC said in its report.

The number of oil rigs in the country hasn't changed in August and the figure was reported to stand at 61, the same number as in July.

Mr Al Falih and Mr Al Mazrouei agreed that an extension of the output cuts beyond March 31 "may be considered in due course as fundamentals unfold", according to the Saudi ministry.

Oil in NY has averaged about $49 a barrel this year as efforts to drain a global glut by the Organisation of Petroleum Exporting Countries and partners including Russian Federation are stifled by rising shale output. Compliance to output cuts improved from 84% in July to 89%. The U.S. Energy Information Administration lowered its forecast for total U.S. crude oil production, however.

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