US oil slides 3% as hurricane threatens demand

NEW YORK — US crude prices tumbled down more than 3% 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 Aug. 25, shut a quarter of US refining capacity, sharply reducing demand for crude that sent prices slumping.

As of Thursday, about 3.80 million barrels of daily refining capacity, or about 20%, 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 3.30%, at $ 47.48 a barrel. Brent crude was down 71 cents, or 1.30%, to $53.78 a barrel after reaching its highest level since April at $54.87.

Brent ended the week up 1.90% while US crude was up 0.40%, 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 Corp.’s 362,300- barrel- per- day Beaumont, Texas, refinery which shut on Aug. 30 due to flooding, may remain closed until the first week of October, sources familiar with plant operations said.

US crude production output fell by almost 8% because of Harvey, from 9.50 million barrels per day ( bpd) to 8.80 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.

Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have hit shipping. “Imports (of oil) to the US Gulf Coast fell to levels not seen since the 1990s,” ANZ said.

The Department of Homeland Security said it is waiving the Jones Act for a week, which will allow fuel to be shipped by foreign- flagged vessels instead of only US-flagged vessels to help ensure that emergency responders during Irma and in the wake of Harvey have enough motor fuel.

US energy firms cut oil rigs for a third time in the past four weeks as a 14-month drilling recovery stalled, with energy firms reducing spending plans in response to falling crude prices. After cutting seven rigs in August, the first monthly reduction since May 2016, drillers cut three oil rigs in the week to Sept. 8, bringing the total down to 756, energy service firm Baker Hughes said. —