Oil ‘steadies’ as Irma heads for Florida, Saudi supply cut
Gold at highest in a year
LONDON, Sept 9, (RTRS): Oil prices steadied on Friday after almost a week of sharp rises as Hurricane Irma, one of the most powerful storms in a century, drove towards Florida after tearing through the Caribbean.
Irma is the second major hurricane to approach the United States in two weeks and has already killed 14, flattening whole islands. Its predecessor, Harvey, shut a quarter of US refineries and 8 percent of US oil production.
“Hurricanes can have a lasting effect on refinery and industry demand,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “The impact of the forces of nature on US oil production should not be overestimated — nor should their impact on demand be underestimated.”
Brent crude was up 16 cents at $54.65 a barrel by 11:45 GMT, after earlier reaching its highest level since April at $54.80. US light crude oil was 14 cents lower at $48.95 barrel.
Brent found some support from news that Saudi Arabia will cut oil supply allocations to its customers worldwide in October by 350,000 barrels per day (bpd).
US crude prices fell as a result of low refining activity following Harvey, which sharply reduced demand for oil to process, traders said.
Harvey’s impact was also felt in oil production. US oil output fell by almost 8 percent, from 9.5 million barrels per day (bpd) to 8.8 million bpd, according to the Energy Information Administration (EIA).
But the slowdown in refining and output should be temporary.
Refineries
“Most refineries are restarting and we expect a near-full recovery by month-end,” US investment bank Jefferies said.
Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also affected shipping.
“Imports (of oil) to the US Gulf Coast fell to levels not seen since the 1990s,” ANZ bank said.
It will take weeks for the US petroleum industry to return to full capacity, analysts say.
Hurricane Irma hit the Dominican Republic and Haiti on Friday, heading for Cuba and the Bahamas. It was predicted to reach Florida by Sunday.
The US National Hurricane Center (NHC) said that Irma was a Category 5 hurricane, with wind speeds of 160-185 miles per hours (260295 km/h).
On Irma’s heels, Hurricane Jose is heading for the Caribbean Leeward islands, which have just been devastated by Irma, with wind speeds of 120 mph (195 km/h).
Meanwhile, gold prices rose to their highest in more than a year on Friday as weak economic data reduced expectations of another interest rate increase in the United States this year, US bond yields fell and the dollar plunged to its weakest since early 2015.
Demand for US government debt and other safe-haven assets rose after an increase in US jobless claims and worries about the impact of hurricanes Irma and Harvey on economic growth.
A weaker dollar fuels demand for gold by making it cheaper for holders of other currencies, while lower bond yields reduce the opportunity cost of owning non-yielding bullion.
Spot gold was up 0.3 percent at $1,352.87 by 12:02 GMT after hitting $1,357.54, its highest since August 2016.
Futures
It was up 2.2 percent this week, on course for a third consecutive weekly gain. US gold futures for December delivery rose 0.5 percent to $1,357.60.
“The dollar has been weakening for some time and that is the main reason gold is going up,” said Julius Baer analyst Carsten Menke.
He said that receding expectations of a US interest rate increase in December were also pushing investors to gold. Money managers’ bets on higher prices increased sharply over July and August.
Gold is highly sensitive to rising interest rates because they push up bond yields and tend to boost the dollar. New York Federal Reserve President William Dudley said on Thursday that US interest rates should rise only gradually given low inflation but did not repeat an assertion three weeks ago that he expects to raise rates once more this year.
Simmering tensions over North Korea also maintained demand for gold as a safe haven, with US President Donald Trump saying he would prefer not to use military action but that if he did it would be a “very sad day” for the Pyongyang leadership.
Technical resistance was at $1,353, gold’s peak in September last year, but upward momentum could lift it to the 2016 high of $1,375, ScotiaMocatta analysts said.
In other precious metals, silver was up 0.7 percent at $18.19 an ounce after touching $18.21, its best since April. It was on course for a 2.8 percent weekly gain. Platinum was up 0.3 percent at $1,019, having touched $1,022.70, its highest since March. Palladium gained 0.1 percent to $955.90 but was heading for a first weekly decline in seven weeks.