U.S. West Texas Intermediate crude oil is trading higher on Friday, but still in a position to close the week lower. In the meantime, gasoline futures are surging. The catalyst behind the price action is the possibility of refinery outages on the U.S. Gulf Coast.
The price action clearly demonstrates that traders are buying refined products such as gasoline and selling crude oil, the primary feedstock at refineries. This move is known as crack-spread buying.
The latest weather reports from the National Hurricane Center indicate that tropical storm Harvey has become a category 2 hurricane with winds of 105 mph, 220 miles off Corpus Christi, Texas.
The Center is also saying that it expects Harvey to strengthen to a Category 3 hurricane with winds of at least 111 mph, which could send the price of gasoline up over 25 cents per barrel.
So far crude oil and gasoline investors are reacting as if this is a temporary event that could play with the inventories numbers for the next week or so.
Crude oil prices are edging higher into the end of the week U.S. petroleum industries prepared for potential output disruptions as the hurricane heads for the heart of the nation’s oil industry between Houston and Corpus Christi, Texas.
With the storm rapidly intensifying, some weather services are already predicting that this may be the biggest hurricane to hit the U.S. mainland in 12 years.
At this time, the forecast calls for the possibility of…