Oil Jumps as Post-Harvey Refinery Revivals Trigger Demand Boost
(Bloomberg) -- Crude rose to the highest in more than three weeks as key refineries and pipelines resumed operation following hurricane-driven shutdowns, stoking demand and making oil futures the best-performing energy contract of the day.
Oil climbed 2.9 percent in New York. Refiners including Valero Energy Corp. and Citgo Petroleum Corp. worked to get Texas plants back on track, while Exxon Mobil Corp. began supplying filling stations with fuel after repairs to a Houston pipeline. Even as the hardest-hit operators worked to resurrect output, traders watched another major hurricane approaching from the east that has already led to the shutdown of an oil terminal.
The market was “waiting for the refineries to restart so demand could start to pick up again,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle, which oversees $142 billion of assets, said by telephone. “That’s really what speculators had been waiting for.”
Harvey forced refineries, pipelines, ports and offshore platforms to shut as the storm intensified before making landfall on Aug. 25. While many of those facilities are back in service, others have yet to resume production, including plants owned by Royal Dutch Shell Plc and Total SA. Still, Goldman Sachs Group Inc. sees half of the refining capacity lost to Harvey back to work by Sept. 7. Dry weather across southeast Texas should help minimize the loss of demand for gasoline and diesel, according to the bank.
"It appears there has been minimal structural damage to the refineries,” Kyle Cooper, director of research at IAF Advisors in Houston, said by telephone.
West Texas Intermediate crude for October delivery added $1.37 to settle at $48.66 a barrel at on the New York Mercantile Exchange. Earlier in the trading session, the contract was up as much as 3.6 percent for the biggest intraday gain since July 25. Brent for November settlement advanced $1.04 to $53.38 a barrel on the London-based ICE Futures Europe exchange and traded at a premium of $4.24 to November WTI.
October gasoline futures dropped 4.88 cents to $1.6991 a gallon. There was no settlement Monday because of the U.S. Labor Day holiday.
Total SA said it is repairing damage and restoring normal utility systems at its Port Arthur, Texas, plant and Shell said its assessing start-up efforts at its Deer Park refinery near Houston. Meanwhile, Enterprise Products Partners LP resumed operations at marine terminals and Sunoco LP was said to have restarted its Mag-Tex refined products pipeline system as of early Tuesday.
Irma, now a Category 5 hurricane, prompted Florida officials to declare a state of emergency for the storm expected to cross the northern Leeward Islands late Tuesday and early Wednesday. The U.S. National Hurricane Center issued warnings for the U.S. and British Virgin Islands, Puerto Rico, Vieques and Culebra. NuStar Energy LP said it shut its St. Eustatius oil terminal on Monday in the Caribbean in advance of the hurricane.
Cushing, Oklahoma, crude stockpiles increased by 1 million barrels last week, according to a forecast compiled by Bloomberg. Strong refining margins will last “several years,” Morgan Stanley said in a note. Russia and Saudi Arabia discussed the possibility of extending the OPEC-led agreement to cut oil production at a meeting in St. Petersburg, Russian Energy Minister Alexander Novak said.
With assistance from Angelina Rascouet, Heesu Lee, Sheela Tobben and Nico Grant. To contact the reporter on this story: Jessica Summers in New York at firstname.lastname@example.org. To contact the editors responsible for this story: Reg Gale at email@example.com Jim Efstathiou Jr., Will Wade.
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