Oil Futures Settle Higher Thursday
NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher Thursday, with RBOB futures spiking 28% this week to a 26-month high as tightening product supply due to the impact of Hurricane Harvey combined with short-covering ahead of the expiration of the September contract Thursday afternoon.
"The market continues to rally as a result of refinery outages and the fact that we don't know the extent of the damage at Exxon Mobil Corp.'s Baytown refinery, which is down," said Andy Lipow, president of Lipow Oil Associates. "The expiry of RBOB is also causing a short squeeze on the September delivered product."
Lipow said 31% of the U.S. refining capacity is impacted by the storm, either through complete refinery shutdown or reduction of runs by some of the refineries in Southeastern Texas. "As a result, U.S. refiners are processing 5.0 million barrels per day (bpd) less crude now than they did before the hurricane."
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Pipelines have been impacted by a lack of supply to ship amid the lost refining output.
Energy Secretary Rick Perry on Thursday released 500,000 barrels (bbl) of crude from Strategic Petroleum Reserve in a bid to prevent gasoline prices from spiking in the wake of disruptions caused by Harvey. Some of the SPR crude will go to Louisiana refineries that have not received imports since the hurricane shut ports along the Gulf Coast.
Some 13.5% of Gulf of Mexico oil production remains shut-in nearly a week after the storm made landfall last Friday in Texas coast as a Category 4 hurricane, the Bureau of Safety and Environment Enforcement said Thursday.
Data from the Energy Information Administration on Wednesday showed crude oil production during the week-ended Aug. 25 slightly up at a 9.53 million bpd better than two-year high while crude oil stocks fell for the ninth straight week to a fresh 19-month low of 457.8 million bbl.
The September RBOB futures contract expired 25.52 cents higher at $2.1399 gallon, easing off a 26-month spot high of $2.1705, while surging 47.86 cents in August. The October RBOB contract rallied 14.17 cents to $1.7792 gallon at settlement.
The September ULSD contract expired 8.37 cents higher at $1.7575 gallon, edging off a $1.7635 gallon eight-month spot high. The October contract was up 8.65 cents at $1.7419 gallon settlement.
The October West Texas Intermediate crude contract settled $1.27 higher at $47.23 bbl, ending near a $47.47 three-day high. ICE October Brent crude expired $1.52 higher at $52.38 bbl, off a three-day high of $52.43, and the November Brent contract settled $1.13 higher at $52.86 bbl.
ICE Brent futures premium over NYMEX WTI futures ended at $5.15 bbl, near Tuesday's $5.56 bbl two-year high.
George Orwel can be reached at george.orwel@dtn.com
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