Oil Price Fundamental Daily Forecast – WTI Prices Underpinned as Some U.S. Refinery Production Resumes
Crude oil prices are up slightly early Monday as investors continue to react to the possibility that more refineries in the Texas Gulf Coast area will resume operations this week. Although they are not expected to resume full capacity for some time, even the smallest amount of production will lead to increased demand for crude oil and this should help underpin prices.
At 0100 GMT, October West Texas Intermediate crude oil is trading $47.37, up $0.08 or +0.17%. November Brent crude oil is at $52.54, down $0.21 or -0.40%.
The U.S. markets are closed on Monday for the Labor Day holiday. The trading that does take place will be on the electronic board. Volume is expected to come in well below average so investors are going to be careful because of the possibility of increased volatility.
As of Friday’s close, about a quarter of U.S. refining capacity remained offline. The buying we saw late last week indicates that investors believe there was no major damage to the infrastructure, therefore, it’s just a matter of time before the refineries start producing gasoline.
The steep drop in gasoline prices late last week are also another sign that the refineries are preparing to come back on line. U.S. gasoline prices hit a two-year high above $2.00 a gallon on Thursday, but on Friday, as two refineries began to restart, the “crack spread” – the difference between crude oil and gasoline prices – fell nearly 11 percent.
Marathon Petroleum Corp’s Galveston Bay Refinery in Texas City, Texas, had raised production to 45 percent of its 459,000 barrel per day capacity, sources told Reuters on Friday, while Citgo Petroleum Corp on Friday said it was beginning to restart its 157,500-barrel-per-day (bpd) refinery in Corpus Christi, Texas.
In other news, the U.S. Energy Secretary approved up to 4.5 million barrels of crude oil to be released from the Strategic Petroleum Reserve.
Additionally, the number of oil rigs operating in the U.S. oil fields was unchanged from the prior week, according to oilfield services firm Baker Hughes. The rig count stood at 759, up from 352 a year ago.
Because of the holiday, the U.S. Energy Information Administration’s weekly inventories report is expected to show a build because of the refinery shut down. At its peak last week during the Hurricane and subsequent flooding, about 1.4 million barrels per day was being moved into storage.
This article was originally posted on FX Empire
