Tropical storms continue to sway oil prices

Hurricane Irma is expected to make landfall in southern Florida during the weekend and may significantly influence regional demand pressures.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Sept. 8, 2017 at 10:02 AM
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Sept. 8 (UPI) -- Prices for major oil benchmarks diverged early Friday as hurricanes in North America continued to sideline storage and production facilities.

An emailed market report from London oil broker PVM said Hurricane Irma was the "obvious" center of market attention on Friday morning. The U.S. National Hurricane Center said Irma had weakened from a Category 5 storm to Category 4 and moving northwest through the central Bahamas toward Florida. Current models show Irma making landfall in Florida by Sunday morning and soaking parts of the area with about a foot of rain.

Gasoline shortages are already reported ahead of the storm. GasBuddy.com, which monitors prices at the retail level, reported about 40 percent of the service stations in the Miami area were out of fuel. Florida Gov. Rick Scott ordered police escorts for fuel deliveries to stations along evacuation routes and the state was exploring its options for port deliveries ahead of Irma's impact.

"The devastating impact of the strongest Atlantic storm has already been felt in the Caribbean and Irma is expected to make landfall in Florida on Sunday," PVM's report read. "Gasoline sales in the Miami-Fort Lauderdale area are five times higher than the average."

Anadarko Petroleum, one of the largest operators in the U.S. Gulf of Mexico, said it pulled non-essential staff from its platforms in the eastern Gulf of Mexico as a precautionary measure against Irma. Production has not been impacted, however.

British energy company BP, meanwhile, already evacuated staff from two of its offshore platforms. Production wasn't impacted, the company said it has enough supplies to meet the needs of its wholesale customers, "but we expect intermittent terminal supply outages and will continue working to locate alternate supplies of gasoline, diesel and other refined fuels as needed."

The threat from weather events is a repeat of the market imbalance triggered by Hurricane Harvey, which hit Texas in late August. About 6 percent of the total U.S. refining capacity is still down and oil is filling up in storage facilities as a result.

Oil prices were mixed early Friday, with West Texas Intermediate, the U.S. benchmark for oil, pulling further away from Brent as U.S. oil remains in storage. WTI as of 9:27 a.m. EDT was down 0.1 percent to $49.04 per barrel. Brent was up 0.42 percent to $54.72 per barrel.

West Texas Intermediate is still trading in the October contract, while Brent moved into November.

Igor Sechin, the head of Russian oil company Rosneft, said the decline in the value of the U.S. dollar was skewing the market.

The value of the dollar influences internationally traded commodities like gold and crude oil. When the value falls, commodity prices increase because more dollars are required to purchase the same quantity as when the value was higher. U.S. crude oil exports are up 9.5 percent from the same period last year as Brent remains more expensive than U.S. barrels.

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