Oil prices fall as Harvey flooding roils US oil industry

TOKYO (Reuters) – US crude futures fell in Asian trading yesterday, partly reversing sharp gains from the previous session, amid ongoing turmoil in the oil industry with nearly a quarter of US refining capacity offline.

US West Texas Intermediate was down 27 cents, or 0.6 percent, at $46.96 barrel at 0434 GMT. The contract rebounded 2.8 percent on Thursday but is still heading for a weekly decline of 1.9 percent.

The new Brent contract for November delivery was down eight cents, or 0.2 percent, at $52.78 barrel. The contract for October delivery, which ended trading on Thursday, closed up $1.52, or 2.99 percent, at $52.38 a barrel.

US gasoline futures have rallied more than 28 percent to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the US Labor Day weekend’s traditional surge in driving.

Gasoline for September delivery settled up 25.52 cents, or 13.5 percent, at $2.1399 on the last day of trading in the contract. Gasoline for October delivery was down 0.2 percent at $1.7750.

“It looks like everyone thinks that the hurricane will affect refining more than production,” said Tony Nunan, oil risk manager at Mitsubishi Corp. “Production will come back faster than refining so it is just going to exacerbate the situation where there’s too much oil.”

Hurricane Harvey has killed more than 40 people and brought record flooding to the US oil heartland of Texas, paralyzing at least 4.4 million barrels per day of refining capacity, according to company reports and Reuters estimates.

The US Department of the Interior’s Bureau of Safety and Environmental Enforcement said that roughly 13.5 percent of oil production in the Gulf of Mexico was also shut in on Thursday.