Amid the shutdown of 20 percent of U.S. refining capacity caused by Hurricane Harvey and the pending shutdown of more refineries as the storm moves on to Louisiana, the EIA's latest weekly inventory report may limit the fall in WTI prices.
The authority reported a draw of 5.4 million barrels for the week ending August 25, a day after the American Petroleum Institute estimated these inventories had fallen by 5.78 million barrels in the period. Analysts had expected a decline of 1.75 million barrels.
Despite the almost uninterrupted string of inventory declines over the last ten weeks, the end of driving season is drawing near and this fact, coupled with the refinery damage Harvey caused, will be certain to affect prices in an adverse way.
In fact, one analyst, CNBC's Jim Cramer, has warned that WTI could fall to the mid-US$30s. He based his forecast on seasonal changes in buying and selling patterns and the fact that large speculators' net long position is now at 445,000 futures contracts, which suggests there is not much space for more buying before the seasonal selling starts.
The EIA said refineries last week processed 17.7 million barrels of crude daily, operating at 96.6 percent of capacity. This compared with runs of 17.5 million bpd a week earlier. Gasoline production averaged 10.6 million barrels per day, flat on last week. Total motor gasoline inventories were unchanged as well. Related: Texas Shale Hit Hard By Hurricane Harvey
Crude oil production in the United States averaged 9.528 million barrels in the week to August 25, the EIA also said, with imports at 7.9 million barrels daily.
In the coming weeks, we will probably see inventory builds not just because of the end of driving season, but also because the effects from Harvey will take at least a couple of months to offset, at least according to Goldman Sachs. "The slow moving nature of the storm will likely lead to these shut-downs continuing in coming days and may generate persistent damage as well," said the bank's head of energy research, Damien Courvalin.
Important Note For Energy Investors: The widening gap between WTI and Brent continues to create opportunities for traders. A spread this wide hasn't occurred since early 2015. Analysts now believe a strong bounce in oil prices is due as inventories have been drawing at a 'phenomenal' pace. Stay informed on these spreads and trends by following the hundreds of global blends on our oil price page.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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