Hurricane Harvey is set to be the biggest to hit the US in almost 12 years and oil facilities across the Texan coast are being evacuated.
Oil prices have increased as the industry prepares itself for Hurricane Harvey which could be the largest storm to hit the US in 12 years. Harvey is growing at a rapid rate and will hit the Texan coast between Houston and Corpus Christi.
Production has temporarily ceased in the area and lengthy closures could be expected if the hurricane causes extensive damage.
US gasoline prices have rose by nearly 10%, their highest levels since April; Brent is up by $0.49/b and WTI increased by $0.40/b this morning due to the postponements. US imports could also be affected due to shipping interruptions.
Shipping to the Port of Corpus Christi has ceased and oil refineries which are operated by Citgo Petroleum, Valero Energy Corp and Flint Hills Resources have shut down in preparation for the hurricane.
Jeffrey Halley, the senior market analyst at futures brokerage OANDA said: “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.”
Regardless of the shutdowns in Texas, global crude oil is in strong supply despite on-going efforts by OPEC to cap production levels, with the aim of supporting prices. OPEC countries and a number of non-OPEC countries, such as Russia have committed to reducing their oil output by around 1.8m barrels per day in 2017 and Quarter-1 of 2018. However, a number of nations have not honoured their commitments and supply remains high, weighing on oil prices. It is hoped that another agreement can be reached to extend supply cuts beyond March 2018.
A rise in US production is a major factor behind the oversupply as it has seen a 13% increase from the middle of 2016 and is close to June 2015 levels which saw a record of 9.61m barrels per day.