Why oil prices keep falling with U.S. refineries knocked out by storm

Lucy Hill
August 31, 2017

The refinery has a capacity of 6,03,000 barrels per day.

USA gasoline prices were over 3 percent higher at $1.8380 per gallon.

Crude prices recovered slightly in Asian trade on Tuesday a day after heavy falls caused by the impact of monster storm Harvey on a key USA oil-producing region. Brent crude traded 54 cents lower at $51.46 a barrel.

International Brent crude futures closed up 0.2 percent to $52.00 a barrel, U.S. West Texas Intermediate (WTI) crude edged down 0.3 percent to $46.44 a barrel, Reuters reported.

"Rising US production, domestic refinery blending constraints, and the end of (the) driving season combined to depress WTI", ING bank said.

The storm caused the closure of many oil refineries, which analysts said would lead to bigger crude stockpiles and push down prices. The discount for U.S. WTI versus Brent reached $5.92 a barrel on Tuesday, its widest in more than two years.

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Crude traded in a narrow but volatile range on Tuesday as the market grappled with the shutdown of some 13 per cent of refining capacity in the United States, the world's largest oil consumer, after a hurricane ripped through the heart of its oil industry.

"US gasoline prices increased by 3% at $1.8380 per gallon, the most since 31 July 2015".

Preparing for more rain and floods, Total cut production to 53% of capacity at its 225,500 bpd Port Arthur refinery, reported a leading research agency. Onshore, numerous nation's refineries remain offline because of heavy flooding in and around the Houston area.

Spot earnings for medium range (MR) tankers in the US Gulf may take a hit if refineries along the Texas coast remain shut in the wake of Hurricane Harvey.

The latest Energy Information Administration (EIA) data recorded an inventory draw of 5.4 million barrels for the week ending August 25th following a draw of 3.3 million barrels the previous week.

Yet crude remains in ample supply, resulting in low prices, with Jefferies bank saying it is lowering its fourth-quarter Brent oil price estimates to $55 a barrel from $60 and its 2018 forecast to $57 from $64.

Other reports by TheDailyFarc

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