Global Oil Prices Diverge in Harvey's Wake
Oil prices were mixed Friday, as Brent extended a week of steady gains but U.S. crude remained stuck at pre-Hurricane Harvey levels.
Brent crude, the global benchmark, rose 0.5% to $54.78 a barrel in midmorning trading in London. On the New York Mercantile Exchange, West Texas Intermediate futures traded down 0.3% at $48.94 a barrel.
WTI, the U.S. standard, was weaker because demand for oil from refineries has been slow to return to normal levels in the wake of Harvey.
"It's still not back to full speed and that's preventing stocks from drawing," said Ole Hansen, head of commodity strategy at Saxo Bank.
Weaker demand has resulted in higher crude inventory levels in the U.S., with concerns about excess supply weighing on prices over the past two weeks.
The U.S. lost more than 20% of its refining capacity in the days after the storm but many refineries have since started to come back online.
Brent prices, meanwhile, neared a 5-month high as they continue to benefit from higher refinery demand in Europe and Asia. With U.S. Gulf Coast ports and refineries out of commission, European and Asian refiners have had to increase production, elevating their demand for crude supplies.
"Nearly every refinery outside Louisiana and Texas is operating near full capacity," said Thomas Pugh, commodities economist at Capital Economics.
But Mr. Pugh said it was only a question of "when, not if" U.S. crude demand would rebound.
Saxo's Mr. Hansen cautioned that these are "temporary factors driving the market." The upside for Brent is "increasingly limited," he argued.
The U.S. Energy Information Administration released weekly data Thursday showing crude inventories rose by 4.6 million barrels during the week ended Sept. 1. The increase was largely expected by analysts and was tempered by data showing production dropped by roughly 750,000 barrels a day as a result of the storm.
Investors and analysts were waiting to see whether Hurricane Irma and expected subsequent storms would affect U.S. production in the Gulf Coast in the coming days.
Oil markets are also awaiting monthly reports set to be published next week by the Organization of the Petroleum Exporting Countries and the International Energy Agency. Analysts will be looking to see if the IEA adjusts its demand estimates.
Among refined products, Nymex reformulated gasoline blendstock -- the benchmark gasoline contract -- was down 0.7%, at $1.66 a gallon, having given up gains last week amid fears of a gasoline shortage in America.
But ICE gasoil, a benchmark for diesel fuel, changed hands at $532.50 a metric ton, up 1.7% from the previous settlement. The fuel has received a boost because of disrupted exports of U.S. distillates from the Gulf Coast.
--- Fox Business