CRANBURY, N.J. (DTN) -- October oil futures traded on the New York Mercantile Exchange settled mixed, with the ULSD contract rallying and RBOB futures again selling off in response to supply and demand data released late morning that offered an initial glimpse into the disruptions caused by Hurricane Harvey and on seasonal features.
October West Texas Intermediate futures on NYMEX softened as the latest forecast shows Hurricane Irma moving north after reaching Florida this weekend, and away from oil production on the Gulf of Mexico. Hurricane Jose is following Hurricane Irma, while Hurricane Katia is moving toward Mexico's coast with maximum sustained wind speeds of 80 miles per hour, according to the National Hurricane Center. Irma remains a category 5 hurricane with the eye of the storm called "extremely dangerous," while Jose has been upgraded to a category 2 hurricane.
If Hurricane Irma follows its forecast, gasoline demand would again be pressured, with the Energy Information Administration reporting gasoline supplied to market during the week-ended Sept. 1 tumbling 683,000 barrels per day (bpd) to a 9.163 million bpd five-month low. Hurricane Harvey scuttled Labor Day travel in parts of the country, with the holiday weekend the unofficial conclusion to the summer driving season.
"Restarting refiners helped gas prices sell off [Wednesday] but as Floridians look to escape Hurricane Irma's wrath, there was strong demand and gas lines and shortages," said Chicago-based Phil Flynn, senior market analyst with the PRICE Futures Group, adding, "prices did not collapse as the trade awaits what damage could be in store."
EIA reported the U.S. refinery run rate at 79.7% of capacity during the week-ended Sept. 1, tumbling 16.9% from prior week amid the string of refinery outages along the Texas coastline and reduced operations at the three refineries in Lake Charles, Louisiana. Crude inputs at U.S. refineries plummeted 3.253 million bpd to 14.472 million bpd.
Affected refineries in Corpus Christi were beginning restart on Sept. 1, which were least effected by flooding. Motiva is restarting its 603,000 bpd refinery in Port Arthur, the country's largest, and ExxonMobil continues to assess the safe return of its 584,000 bpd Baytown refinery, the nation's second largest refinery.
During the week-ended Sept. 1, EIA reported a 4.6 million barrel (bbl) build in domestic crude supply to 462.4 million bbl, the first weekly build since mid-June. EIA also reported a 3.2 million bbl draw in gasoline supply to a 10-month low at 226.7 million bbl, and a 1.4 million bbl decline in distillate fuel to a 147.8 million bbl four-week low.
EIA reported a 153,000 bpd increase in implied distillate demand to 4.063 million bpd during the week reviewed, while the four-week average through Sept. 1 at 4.068 million bpd is 367,000 bpd, or 9.9%, above the comparable year-ago period.
NYMEX October ULSD futures rallied to a $1.7870 gallon two-year, two-month high on the spot continuation chart, and settled up for the third straight session, gaining 2.66 cents with a $1.7861 gallon settlement.
NYMEX October RBOB futures settled down 1.23 cents at $1.6610 gallon, ending lower for the fourth straight session, and sliding to its lowest trade since Aug. 25 -- the day Hurricane Harvey made its first landfall near Corpus Christi, at $1.6425 gallon. RBOB futures have now erased the advance triggered by Harvey, which peaked on Aug. 31 at $2.1705 gallon by the now expired September contract amid a short squeeze.
NYMEX October WTI futures held to a tight range amid inside trade, holding below Wednesday's $49.42 bbl one-month spot high with a $49.33 intraday high today and settling down 7 cents at $49.09 bbl.
Lending upside support for WTI futures was further weakness in the U.S. dollar, which slumped to a two-year, eight-month low amid diminished expectations the Federal Open Market Committee would hike the federal funds rate when they meet Sept. 19-20. In contrast, the euro has strengthened, muddling the European Central Bank's timeline to begin unwinding monetary stimulus measures. Comments today from ECB President Mario Draghi suggested the central bank would address unwinding stimulus measures in October as the market expected, boosting the euro and weakening the dollar.
November Brent crude futures on the IntercontinentalExchange settled up 29 cents at $54.49 bbl, edging off a $54.67 bbl 3-1/2 month high on the spot continuation chart. It was the third consecutive high for Brent, matching the May 25 high today, with Brent's calendar spreads narrowing and the front end of Brent's forward curve in backwardation, a bullish market structure.
At $5.40 bbl, Brent again widened its premium with WTI, which should encourage U.S. crude exports. However, and partly because of the string of hurricanes, U.S. crude exports have been constrained. During the week-ended Sept. 1, the EIA shows U.S. crude exports plunged 749,000 bpd or 83.0% to 153,000 bpd, the lowest weekly export rate since June 2014, amid port closures due to the effects of Hurricane Harvey.
Brian L. Milne can be reached at firstname.lastname@example.org
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