Analysis by Dr. Nancy Yamaguchi

WTI crude prices opened today’s session above $49/b for the first time in four weeks. Prices are easing slightly this morning. Demand for crude oil is rising as refineries re-open following Hurricane Harvey. Markets are reacting now to Hurricane Irma, a category 5 hurricane with wind speeds clocked at over 180 miles per hour. Landfall occurred in the Caribbean yesterday, causing destruction and fatalities in Barbuda, St. Martin, and the British Virgin Islands. By evening, the eye of the storm passed around 85 miles north by northwest of San Juan, the capital of Puerto Rico. Most of the island is without power today, and many lack fresh water. The storm is expected to be north of Cuba by Friday and Saturday. Depending on the path, it could reach Florida on Sunday.

Under worst-case modeling scenarios, Hurricane Irma could be even more destructive than Hurricane Andrew in 1992. Moreover, two other hurricanes are evolving in the Atlantic. Hurricane Jose is forecast the skirt the Lesser Antilles in the Caribbean this weekend, hopefully veering to the north. Hurricane Katia remains at sea, with little motion expected for the next few days.

Although Gulf Coast refineries are producing more fuel, distribution systems are not fully optimized. Floridians wishing to top off their tanks and perhaps evacuate the coastal areas already are having difficulty finding fuel and negotiating traffic. There are no refineries in Florida, and fuel is delivered by tanker, barge and truck. Just after Hurricane Harvey, deliveries were disrupted, and some gasoline shipments went from Florida to Texas. Gasoline is now being brought into Florida, but coastal traffic will be constrained soon. Demand may drop if flooding and destruction shut in the residents.

The American Petroleum Institute (API) reportedly expects a crude inventory build of 2.791 mmbbls for the week ended September 1st. This fell short of the 4.022 mmbbls expected by the industry survey. API expects a gasoline stock draw of 2.544 mmbbls, vs the industry expectation of 5.0 mmbbls. The API also reported a 0.603-mmbbl drawdown in distillate inventories.

The official weekly supply data from the Energy Information Administration (EIA) will be delayed by one day because of the Labor Day holiday.

WTI crude opened at $49.14/b this session, a significant increase of $0.55 from yesterday’s opening. Currently this morning, WTI prices have eased to $48.95/b, down by $0.19 since today’s opening. The daily price range has been $48.84-$49.33/b.