CRANBURY, N.J. (DTN) -- Oil futures with nearest delivery traded on the New York Mercantile Exchange settled mixed Wednesday, as returning refineries after Hurricane Harvey and more storm activity rallied the West Texas Intermediate contract to its fourth consecutive advance while RBOB futures registered its third straight decline. ULSD futures gained amid inside trade, holding below Tuesday's $1.7736 26-month high on the spot continuation chart.
Oil refineries along the Texas coastline shut by Hurricane Harvey continue their recovery, with Turner, Mason and Company reporting eight refineries with a 1.873 million bpd capacity affected by the storm at full rates and six refineries with 2.027 million bpd in capacity in the restart process. Three refineries with 905,000 bpd of capacity remain shut, according to the consulting engineers, while the three refineries in Lake Charles, Louisiana, situated near the Texas border with a combined capacity of 789,000 bpd are operating at full rates. As the recovery from Harvey continues, the most powerful hurricane recorded in the Atlantic Ocean is expected to reach Florida this weekend.
Hurricane Irma's core is "battering the Virgin Islands," said the National Hurricane Center in the latest update on the storm this afternoon, with the storm forecast to reach southern Florida Sunday morning (9/10). Irma, a category 5 hurricane, is currently seen moving north along the Eastern Seaboard where it would have a dampening effect on transportation in the heavily populated region. Irma could take a westward shift and head to the Gulf of Mexico, where it would threaten offshore oil and gas production.
Tropical Storm Jose is in the Atlantic chasing Irma, while Tropical Storm Katia moves north along eastern Mexico, threatening offshore production in the Gulf.
Climbing crude inputs at refineries and the threat of more shut-in production in the Gulf of Mexico rallied NYMEX October WTI futures to a one-month high on the spot continuation chart of $49.42 bbl while settling up 50cts at $49.16 bbl. A weaker U.S. dollar, which slipped to a one-week low in index trading, testing support at the 91.55 Aug. 29 two-year, eight-month low, also boosted the contract.
November Brent crude futures on the IntercontinentalExchange outpaced the advance by WTI, rallying to a $54.31 2-1/2 month high on the spot continuation chart, before settling up 82cts at $54.20 bbl. The front end of Brent's forward curve is in backwardation, a bullish market structure in which futures nearest to delivery trades at a premium to later delivered contracts.
Brent widened its premium to WTI to $5.04 bbl, an incentive to boost U.S. crude exports.
Confidence by Russian and Saudi Arabian officials that coordinated production cuts by the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers would be extended by another three months through June 2018 is underpinning strength in the Brent contract.
NYMEX October ULSD futures settled up 1.15cts at $1.7595 gallon, with October RBOB futures ending down 2.58cts at $1.6733, paring a decline to a $1.6430 1-1/2 week low.
The gasoline contract, which spiked to $2.1705 gallon on Aug. 31 by the expiring September contract amid a short squeeze, continues to weaken as supply is quickly returning after Harvey while driving demand in Houston, the fourth largest city in the United States, is heavily curtailed by flooding. A move by Irma along the Eastern Seaboard would also pressure gasoline demand, while seasonally gasoline demand consistently declines in September from August consumption rates.
The weakness in gasoline is also shown in the gasoline crack, which dropped from a $42.65 bbl spike on Aug. 31 to $21.41 bbl this afternoon, near July's high.
The mixed session comes ahead of the release of Labor Day-delayed weekly supply statistics, which are expected to show a 250,000 bbl draw in crude stocks, a 4.0 million bbl plunge in gasoline inventory, and a 2.5 million bbl decline in distillate fuel for the week ended Sept. 1. Refinery runs are expected to have dropped 9.0% to 87.6% of capacity.
The American Petroleum Institute will release its report at 4:30 PM ET and the Energy Information Administration their weekly data at 11 AM ET Thursday.
Brian Milne can be reached at email@example.com
© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.