NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were mixed Tuesday morning with crude oil higher while the contracts for refined products sank early during the first session of the holiday-shortened trade week, as fear over gasoline supply shortages eased.
NYMEX West Texas Intermediate crude and Brent crude oil futures on the IntercontinentalExchange both rose as refineries along the Texas coastline gradually restarted after shutting down for several days due to flooding caused by Hurricane Harvey.
Harvey hit the Texas coast on Aug. 25 and knocked out about 31% of all U.S. refining capacity and 21% of the Gulf of Mexico oil production.
As floodwaters recede, Texas is working to recover from the devastation of the storm, with the Houston Ship Channel now open and several oil refineries and product pipelines restarting operations.
Eight oil refineries with a combined 1.8 million barrels per day bpd, or 9.6%, of total U.S. refining capacity have begun the process of restarting as of Sept. 4, according to the Department of Energy. At least four refineries in the Gulf region were operating at reduced rates, and no refineries had returned to normal rates.
Colonial Pipeline resumed service at the Pasadena and Houston origin points for its 1.056 million bpd main distillate line 2, and expects to resume service for the 1.272 million main gasoline line 1 from the Pasadena and Houston points today. Both mainlines have operated intermittingly from the system's Lake Charles origin point in Louisiana east, with an embargo on service from all Texas origin points declared last week because of a lack of fuel to ship. An interruption of service continues at Colonial's Cedar Bayou origin point in the Houston area, and at the Hebert origin point, which collects supply from Beaumont and Port Arthur refineries.
Seasonal gasoline demand consistently declines in September after Labor Day, the unofficial end of peak summer driving season, also exerting pressure on RBOB futures.
The oil market is warily watching Hurricane Irma, which this morning strengthened into "an extremely dangerous Category 5 hurricane" in the Caribbean, according to the National Hurricane Center. The current forecast is for the storm to reach southern Florida this weekend.
The Organization of the Petroleum Exporting Countries is sending signals that the 1.8 million bpd in oil production cuts agreed to with their 10 non-OPEC allies could be extended beyond their current March 2018 deadline. There is no deal yet, but Saudi Arabia and Russia have recently discussed extending the duration of output cuts through June 2018, according to wire reports quoting energy ministers from Russia and Iran. Those talks are generating speculative buying interest in Brent futures.
In early trade, October RBOB futures tumbled 6.09 cents to $1.6870 gallon, off a $1.6579 one-week spot low. October ULSD futures were 0.21 cent lower at $1.7447 gallon, reversing off a $1.7736 26-month high on the spot continuation chart.
The NYMEX October WTI crude contract spiked $1.38 to $48.67 per barrel (bbl), near a two-week spot high of $48.70. ICE November Brent crude gained 99 cents to $53.33 bbl, near a three-week spot high of $53.35.
George Orwel can be reached at email@example.com
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