The amount of oil held in USA storage tanks rose by 4.6 million barrels last week after Hurricane Harvey added to the glut that has kept crude prices low for more than three years. Brent crude LCOc1 was down 71 cents, or 1.3 percent, to $53.78 a barrel after reaching its highest level since April at $54.87.
As of 1656 BST, front month West Texas Intermediate crude oil futures were 0.06% lower to $49.13 a barrel on the NYMEX.
Both benchmarks remained on track for slight weekly gains.
The build in crude stockpiles comes after heavy flooding due to storm Harvey knocked out almost quarter of the USA refining capacity last week, lowering demand for crude oil, the primary input at refineries. As of late Thursday, data from S&P Global Platts showed that 12.8% of US refinery capacity was down due to the storm. “The data scrambles the recent trend of declining crude inventories and further rises are likely in the weeks ahead”, said John Kilduff, partner at energy hedge fund Again Capital LLC in NY.
Weaker demand has resulted in higher crude inventory levels in the USA, with concerns about excess supply weighing on prices over the past two weeks.
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.
It also reported that domestic refinery utilization dropped to 79.7% of capacity from 96.6% a week earlier.
“Most refineries are restarting and we expect a near-full recovery by month-end”, USA investment bank Jefferies said.
Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also impacted shipping.
As the oil industry continues to grapple with the fallout from Harvey, a much bigger Hurricane was lashing the Caribbean islands and heading for the United States.
Next week, the market will see monthly reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency on Tuesday and Wednesday, respectively.
Meanwhile, gasoline futures shed 0.8 cents, or about 0.5%, to $1.662 a gallon, as fears of a serious supply crunch continued to fade. This has led to a drastic supply gap of fuels like gasoline.