As refineries along the Gulf Coast started returning to normal operations after Hurricane Harvey, WTI prices inched up despite a sluggish trading session yesterday due to Labor Day. At around 9:20 AM CST today, the U.S. benchmark was trading at US$48.65 a barrel, up 2.88 percent. Brent, on the other hand, was up 1.8 percent to US$53.28.
The biggest storm in more than five decades to hit the Texas coast took about 20 percent of the country's refining capacity offline. As of Sunday, the Wall Street Journal noted, citing S&P Platts, around 2.3 million barrels of refining capacity, or 13 percent of the total in the United States, remained shut down. Including partial shutdowns, around 17 percent of refining capacity was offline as of Sunday.
By Monday afternoon, however, the shut-down capacity had fallen to 2.1 million bpd, according to the Department of Energy as quoted by Reuters.
Still, the news of refineries resuming operation pressured gasoline prices, with the Nymex reformulated gasoline blendstock benchmark falling by 3.07 percent by early afternoon yesterday to US$1.69 a gallon. A Monday announcement from Colonial Pipeline Co. that it would restart the operation of its pipeline that supplies gasoline to the East Coast further helped the drop in gas prices. At 9:20 AM CST today, gasoline was trading at US$1.69 a gallon.
Meanwhile, however, traders are selling oil amid another spike in geopolitical tensions. The spike followed the latest missile test North Korea performed over the weekend that was said to be carrying a hydrogen bomb. The selloff mainly affected Brent, as some 96,000 bpd in daily production capacity in the U.S. section of the Gulf of Mexico remains offline after Harvey.
With the prospects of an open war with North Korea increase, traders are dumping oil and going into gold - the ultimate safe haven. Yet an open war could lead to a substantial spike in international crude prices. Such a conflict would cripple North Asia's production and refining capacity, Wood Mackenzie said last week. Some 65 percent of Asia's crude oil refining capacity is located in China, Japan, and South Korea.
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