NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved lower Monday morning with the market mulling the impact of Hurricane Irma and weekend talks between Saudi Arabia's oil minister and his counterparts from Venezuela and Kazakhstan over a possible extension of production cuts beyond next March.
The retreat for the futures complex was driven by concerns the storm could curtail demand for gasoline. Having made landfall early Sunday in Florida as a Category 4 hurricane, Irma has now been downgraded to a tropical storm with sustained winds of 70 mph, heading to Georgia and Alabama.
So far, damage from the storm in Florida has been less than expected, limited to power outages although some flooding continues in parts of the state, especially central Florida. Irma knocked out power to nearly 4 million Florida homes and businesses after millions were told to evacuate ahead of the storm.
Irma comes on the heels of Hurricane Harvey, which struck the southern Texas coast about two weeks ago, knocking out 31% of the U.S. refining capacity, many of which are now restarting operations.
Investment bank Goldman Sachs said in a note that the two hurricanes would have a bearish impact on the oil market this month by paralyzing large swaths of the southern U.S. ranging from Texas to South Carolina for days. They have reduced gasoline demand by consumers while refiners have cut their crude oil throughput.
Goldman Sachs estimates that U.S. crude oil inventories would rebuild by 40 million barrels (bbl) in September as a result of the hurricanes, pushing stockpiles to nearly 500 million bbl.
According to the Energy Information Administration, crude oil stocks increased 4.6 million bbl to 462.4 million bbl during the week-ended Sept. 1 while refinery runs dropped by 16.9% to 79.7% due to Harvey.
Meantime, there were talks over the weekend between Saudi Arabia's oil minister Khalid al-Falih and his Venezuela and Kazakhstan counterparts over a possible extension to their agreement to cut 1.8 million barrels per day (bpd) in oil production beyond next March deadline, perhaps through June 2018.
Hedge funds and other speculators added length in oil futures during the week-ended Sept. 5, according to the latest data from Commodity Futures Trading Commission.
At last look, NYMEX October West Texas Intermediate crude oil was little changed, down 4 cents at $47.44 bbl. November Brent crude on the ICE platform declined by 48cts to $53.30 bbl, near a three-day low of $53.26.
NYMEX October ULSD futures were 2.97 cents lower at $1.7360 gallon, near a four-day low of $1.7352, while October RBOB futures dropped 3.50 cents to $1.6126 gallon, near a two-week spot low of $1.6104.
George Orwel can be reached at email@example.com
© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.