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Oil prices dip on refinery shutdown

31 August 2017

Petrol futures surged yesterday to another two-year high and crude oil was down, as flooding and damage from Tropical Storm Harvey shut almost a quarter of U.S. refinery capacity, curbing demand for crude while raising the risk of fuel shortages.

The storm caused the closure of many oil refineries, which analysts said would lead to bigger crude stockpiles and push down prices.

October West Texas Intermediate crude fell 48 cents, or 1%, to settle at $45.96 a barrel on the New York Mercantile Exchange.

The refinery closures helped to push US gasoline futures to a two-year high of $1.7799 per gallon on Monday, though they had receded to $1.7466 by 1325 GMT on Tuesday.

The Energy Information Administration reported a bigger-than-expected weekly drop in USA crude supplies, but gasoline stockpiles were flat and traders expect next week's government report to reveal the impact of Hurricane Harvey-related crude production and refinery shutdowns.

Goldman also said around 1.4 million bpd of crude production was disrupted, equivalent to 15 percent of total US output.

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By 4:36pm EST, WTI was trading at $46.38 with Brent Crude trading at $51.96. Prices earlier climbed to the most since July 31, 2015, at $1.842.

Motiva Enterprises made a decision to close its 603,000bpd plant in Port Arthur, Texas, while Total halved the output of its refinery, which is in the same area. Some refineries were preparing for restarts, but heavy rains are expected to last through Wednesday, adding to catastrophic flooding in Houston. Still, tropical Storm Harvey, which was downgraded from a hurricane, hit refiners harder.

The latest Energy Information Administration (EIA) data recorded an inventory draw of 5.4 million barrels for the week ending August 25th following a draw of 3.3 million barrels the previous week.

Crude markets were also looking at disruptions in Libya and Colombia.

In addition to shutting oil refineries, about 1.4 million bpd of USA crude production has been disrupted, equivalent to 15 percent of total output, Goldman Sachs said.

Yet crude remains in ample supply, resulting in low prices, with Jefferies bank saying it is lowering its fourth-quarter Brent oil price estimates to $55 a barrel from $60 and its 2018 forecast to $57 from $64.

Oil prices dip on refinery shutdown