Oil prices are poised to climb over the coming weeks as supply and demand approach parity, according to analysts who spoke to CNBC as the remnants of Hurricane Harvey continues to ravage Houston, the energy capital of the United States.
A rise in oil demand for 2017 made large strides in closing the gap between available crude and the number of willing buyers, sources said.
"[Oil prices] should be going up because inventories have been drawing at a phenomenal pace over the past few weeks and months," Amrita Sen of Energy Aspects said.
Both West Texas Intermediate and Brent barrel prices traded down on Tuesday as Tropical Storm Harvey continues to pound the U.S. Gulf coast. The spread between the two benchmarks grew to over $5 – the widest in over two years – not completely due to the inclement weather in Texas.
"Harvey has widened the Brent-WTI spread to almost $6, but North Sea maintenance, new disruptions, and higher U.S. output were already driving the spread wider," a note from Barclays said.
Oil refiners have shut down around 1 million bpd of refining capacity in Texas, Bloomberg reported on Friday, just as the storm was getting ready to hit the Gulf coast. Oil refineries in Corpus Christi operated by Citgo Petroleum, Valero Energy Corp, and Flint Hills Resources have also started to shut down ahead of the landfall. Related: China Creates World’s Biggest Power Group With $271B In Assets
Shell, Exxon, and Anadarko had reduced production in the Gulf of Mexico ahead of the storm.
“The biggest impact of this storm will be a significant reduction of crude oil imports into the Texas Gulf Coast,” Andy Lipow at Lipow Oil Associates, a Houston-based consultancy, told the Financial Times, adding that the refinery shutdowns and possible flooding could raise national gasoline prices by 5 to 10 cents a gallon.
By Zainab Calcuttawala for Oilprice.com
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