Triple threat
Hurricane Irma is doing one more thing aside from wreaking physical havoc in the US: just like Harvey before it, it’s threatening energy demand — and as of Thursday 20% of the nation’s capacity is still shut. There’s more bad news: Jose is heading for the Carribean, hot on Irma’s heels.
new york — US crude prices tumbled down more than three per cent on Friday worries that energy demand would be hit hard as Hurricane Irma, one of the most powerful storms in a century, headed toward Florida and the Southeast.
Irma, the second major hurricane to approach the United States in two weeks was forecast to slam southern Florida on Sunday. It has already killed 14 and destroyed islands in the Caribbean, with Hurricane Jose heading for the Caribbean Leeward islands, close on the heels of Irma.
Its predecessor Harvey, which hit Texas on August 25, shut a quarter of US refining capacity, sharply reducing demand for crude that sent prices slumping.
As of Thursday, about 3.8 million barrels of daily refining capacity, or about 20 per cent, was still shut in and it will take weeks for the US petroleum industry to return to full capacity, analysts said. In the case of Irma, analysts are more worried that devastation wrought by the storm could sharply reduce demand for energy.
US crude settled down $1.61, or 3.3 per cent, at $47.48 a barrel. Brent crude was down 71¢, or 1.3 per cent, to $53.78 a barrel after reaching its highest level since April at $54.87.
Brent ended the week up 1.9 per cent while U.S. crude was up 0.4 per cent, paring most of its earlier weekly gains on worries on the continued impact of hurricanes on demand and supply. “Hurricanes can have a lasting effect on refinery and industry demand,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
Exxon Mobil’s 362,300-barrelper-day Beaumont, Texas, refinery, which shut on August 30 due to flooding, may remain closed until the first week of October, sources familiar with plant operations said.
US crude production output fell almost eight per cent because of Harvey, from 9.5 million bpd to 8.8 million bpd, according to the Energy Information Administration. Irma, however, was not expected to affect supply as it was headed away from US oil production in the Gulf.
“Irma looks like it will miss the key Gulf areas, and we’re more worried about shale,” said Mark Watkins, regional investment manager at US Bank. —