The key is that the historic storm has hammered demand by crude oil’s biggest customers: refineries and American drivers.
Cordier added, “we think Nigeria, Libya, and what’s happening in Texas of course with the great expansion of crude oil production is going to probably equal a lot of the production cuts out of OPEC.we think as we go into the shoulder season.we’re probably going to have extra barrels and we think oil is probably going to race away from this $50 level quite a bit to the downside”.
In fact, as the world’s largest refined product exporter, disruptions in the US will be felt around the world.
Motiva’s massive oil refinery in Port Arthur, the largest in the country, is now running at 40% capacity, according to the company.
The Colonial Pipeline operator said Tuesday the reduction was due to limited supply from refiners around Houston and storm damage to its facilities in several southeast Texas locations.
Gasoline prices hit two-year highs after Hurricane Harvey.
Nearly 3 million barrels of oil a day can’t be refined into gasoline and other products – about 16% of US refining capacity, according to Goldman Sachs.
If this is the case, customers for USA crude and product exports may well find themselves scrambling to line up replacement cargoes. Negative momentum has reaccelerated, as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices for crude oil.
The cost of a barrel of oil has gyrated around the $50 per barrel mark for some time and last month the International Energy Agency (IEA) said global demand will outpace previous estimates in 2017. “The U.S. oil production landscape has moved more onshore essentially, away from the Gulf of Mexico”.
The storm caused the closure of many oil platforms in the Gulf, and about a fifth of the region’s oil output remained shut down, according to U.S. authorities.
“Only a few minor problems with flooding have been reported, but” the slow progression of the storm will probably lead to additional closures in the next few days and could generate more damage”. ExxonMobil’s shale unit, XTO Energy, shut in all production that was situated in Hurricane Harvey’s path, although production details were not provided.
“This flooding issue could be a persistent issue with the staff unable to repopulate the facilities”, said John Kilduff, partner with energy hedge fund Again Capital in NY. 25 inches of rain has already dropped in Houston, and another 20 inches is expected.