- Concerns that hurricane could reduce U.S. production
- OPEC/non-OPEC producers mull extension of output cut
Oil prices rose on Friday as the U.S. petroleum industry prepared for the arrival on the coast of Texas of Hurricane Harvey, which threatens to disrupt onshore and offshore production.
The tropical storm has rapidly intensified since Thursday, spinning into potentially the biggest hurricane to hit the mainland United States in 12 years and taking aim at the heart of the nation’s oil refining industry between Houston and Corpus Christi.
U.S. West Texas Intermediate (WTI) crude futures were at $47.74 a barrel at 0219 GMT, up 31 cents, or 0.6 percent, from their last settlement.
Brent crude futures, the international benchmark for oil prices, were at $52.40 per barrel, up 36 cents, or 0.7 percent, from their last close.
Traders said prices rose as oil production in the affected area shut down in preparation for the hurricane, and on expectations that closures could last if the storm causes extensive damage.
The price rises came after crude fell by about 2 percent late in the previous session as refiners also shut down ahead of the storm, reducing their short-term crude demand.
Overall, however, analysts said that disrupted production was the bigger risk.
“Damage and flooding to refineries and shale fields, disrupted production in the Gulf of Mexico and infrastructure damage are unlikely to be bearish for WTI,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.
Beyond the storm’s potential impact on the oil industry, crude remains in ample supply globally despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to hold back production in order to prop up prices.
OPEC, together with other producers including Russia, has pledged to cut output by around 1.8 million barrels per day (bpd) this year and during the first quarter of 2018.
However, not all producers have lived up to their pledges and supplies remain high, resulting in ongoing low prices.
A joint OPEC, non-OPEC monitoring ministerial committee said on Thursday that an extension to the supply-cut pact beyond March was possible, though not yet decided.