WTI Futures Tumble, RBOB Futures Rally

WTI Futures Tumble, RBOB Futures Rally

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures ended mixed Monday afternoon with September RBOB futures paring gains after posting a better than two-year high after Hurricane Harvey left the Texas coast reeling, with refinery outages fueling concern over potential supply shortages.

"Initially RBOB spiked while West Texas Intermediate crude declined on concern over refinery shutdowns, which means demand destruction for crude and lower product output, but now we are hearing that some refineries in Galveston could restart as early as tomorrow, and that's why RBOB gave up some of the gains," said analyst Phil Flynn at Price Futures.

After making landfall as a Category 4 storm last Friday, Harvey has now been downgraded to a tropical storm, but continues to lash the U.S. Gulf Coast.

Flooding from heavy rains brought by the storm has devastated the heart of the U.S. oil and gas industry. The city of Houston and its suburbs are drenched in 30 inches of rain, with an additional 20 inches expected, the National Hurricane Center said.

The ports of Houston and Corpus Christi and several others along the Texas Gulf Coast have been closed, and several refineries, pipelines and terminals in the region idled. Refinery shutdowns are estimated to have curtailed about 2.2 million bpd of crude refining capacity.

However, offshore oil production is slowing coming back after the storm passed. About 19.0% of the current oil production in the Gulf of Mexico of 1.75 million bpd remains shut-in, said the Bureau of Safety and Environmental Enforcement. That equates to 331,370 bpd still shut-in.

The full extent of the damage won't be known for days, but it "will be horrific," said Texas Gov. Greg Abbott, adding that 54 counties were affected by the storm. Other emergency officials have said at least eight deaths in have been reported, 30,000 residents looking for temporary shelters and 450,000 in need of disaster aid.

More rain is expected and power outages resulting from the storm are impacting gas stations, with long lines at the pump expected for days, officials said.

Some traders were reported squaring their positions ahead of Thursday's (8/31) expiration of the NYMEX September contracts for RBOB and ULSD futures and the October Brent contract on the IntercontinentalExchange.

Meantime, an early survey of weekly oil inventory report for the week-ended Aug. 25 shows the market expects stock draws of 2.5 million bbl for crude, 2.2 million bbl for gasoline and 1.0 million bbl for middle distillate fuels.

The September RBOB futures advanced by 4.57cts to a $1.7123 gallon settlement, off a better than two-year spot high of $1.7799. The October contract settled up 3.05cts to $1.5713 gallon.

September ULSD futures contract gained 1.29cts to $1.6352 gallon at settlement, off a three-week high of $1.6681, and the October contract settled 0.70cts higher at $1.6309 gallon.

The NYMEX October WTI crude contract settled $1.30 lower at $46.57 bbl, off a one-month spot low of $46.15. The October Brent crude contract on the ICE platform settled down 52cts at $51.89 bbl, with the November contract also down 56cts at $51.42 bbl.

George Orwel can be reached at George.orwel@dtn.com