In the wake of the hurricanes Harvey and Irma, oil demand is expected to drop by some 900,000 bpd this month, Goldman Sachs said on Monday.
“Irma will have a negative impact on oil demand but not on oil production or processing,” Goldman analysts said in a note, as carried by Reuters.
“Harvey’s negative impact on demand will remain larger, however, given the large concentration of energy-intensive petrochemical activity in its path,” the bank said.
According to Goldman’s estimates, the combined effects of production disruption and demand drop from hurricanes Harvey and Irma alone will lift global oil inventories by 600,000 bpd in September.
For next month, estimates are that the hurricanes will lower oil demand by some 300,000 bpd, according to Goldman Sachs.
Gasoline demand will suffer the most from the storms, adding to the expected 150,000-bpd drop this month due to seasonal factors, Goldman said.
Harvey hit Texas and Louisiana two weeks ago, and led to more than one-fifth of the U.S. refining capacity to shut down. Refineries are restarting in Texas and as of 02:00 PM EDT on Sunday, five refineries in the Gulf Coast region were still shut down, with a combined refining capacity of 1,069,300 bpd, equal to 11 percent of total Gulf Coast refining capacity and 5.8 percent of total U.S. refining capacity, according to the DOE.
Irma made a landfall in Florida on Sunday, and is barreling through the state to the northwest. Although it has weakened to a tropical storm, Irma is still producing some wind gusts to near-hurricane force, the National Hurricane Center said at 8:00am EDT on Monday.
Last week, Goldman Sachs said that reconstruction in Hurricane Harvey’s aftermath was expected to be ultimately positive for U.S. oil demand in a few months, as fuel consumption is expected to increase as people rebuild homes. Related: The U.S. Oil Patch Has A Serious Cybersecurity Problem
However, Goldman said that its prediction for increased fuel demand could be upset if Hurricane Irma were to make landfall in Florida, where it would not be felt so much on the sparse oil infrastructure than on fuel demand.
Irma did make a landfall in Florida and is expected to lead to lower demand in the coming weeks.
By Tsvetana Paraskova for Oilprice.com
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