Almaty. August 27. KazTAG - Oil eked out a gain following a choppy trading session as traders eyed declining U.S. stockpiles and expected weaker demand from the shutdown of Gulf Coast refineries ahead of Hurricane Laura, reports Bloomberg.
Domestic crude inventories fell nearly 5 million barrels last week for a fifth straight week of declines, U.S. government data show, a positive development for a market in which inventories are still at the highest seasonally in decades because of the pandemic’s demand destruction.
Meanwhile, more than 80% of oil output in the Gulf of Mexico and nearly 3 million barrels of a day of refining capacity has been shut ahead of the storm’s landfall. Overnight, Laura shifted further east and is less likely to significantly disrupt refineries and ports in the Houston area.
There’s going to be “a drop in crude demand because of pretty healthy shutdowns for refiners,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. Plus, “you still have this big overhang of inventory.”
Hurricane Laura has strengthened into a powerful Category 4 storm and will likely hit the U.S. Gulf Coast early Thursday. It’s already forced a wave of refinery shut-ins in Texas and Louisiana, raising concerns that U.S. East Coast gasoline could spike following the storm. Still, gasoline demand in key consuming nations is stuck at about 10% to 15% below year-earlier levels and supplies are plentiful.
Even with the storm, gasoline stockpiles “are still above normal,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “At the same time, you also destroy some demand in the region.”
The storm is also upending flows of oil and products. About 64 crude oil and refined product tankers in the western U.S. Gulf are waiting on Laura to pass, according to ship tracking data compiled by Bloomberg. U.S. crude imports are dropping steeply this week as ports close and vessels steer away from the storm, according to ClipperData.
The EIA report also showed gasoline supplies declined to the lowest since the middle of December and refinery runs rose to the highest since March, signaling an uptick in demand.
That’s reflective of the outlook that refiners have of the need for refined products in anticipation of future demand, said Rob Thummel, a portfolio manager at Tortoise. “Refineries clearly are seeing the indication that there’s a recovery that’s underway.”
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