Analysis by Dr. Nancy Yamaguchi
WTI crude prices have strengthened this morning, and they are in the range of $48.25-$48.50/b. Crude oil demand is recovering somewhat now that refineries shut in by Hurricane Harvey are beginning to come back onstream. These include Citgo, Flint Hills, and Marathon refineries. Refined fuel prices have relaxed, both because of expanded supply and because of demand destruction in Florida. Goldman Sachs believes that fuel use in September and October could drop by 300 kbpd because of destruction caused by Hurricane Irma.
Hurricane Irma finally lost strength and was downgraded to a tropical storm. Although the damage was far less than expected, it was extensive. Estimates of the number of people left without electricity have been grown to a mind-boggling 6.7 million people. The storm is now expected to bring heavy rains to Georgia.
As estimates of Irma’s damage began to be revised down, U.S. stocks rose to new record-highs, and the U.S. Dollar climbed. The Dow Jones Industrial Average climbed above 22,000.
The United Nations Security Council approved new sanctions on North Korea. In order to gain support from China and Russia, the United States dropped its earlier demands for an oil embargo. Instead, the U.N. Resolution calls for a reduction of 2 million barrels per year of refined product exports to North Korea, a ban on textile exports, and more stringent inspection of ships and ship cargoes.
OPEC has just released its data on monthly crude production in August. According to secondary sources used by the group, OPEC managed to cut crude production by 79.1 kbpd in August, relative to July. July’s output was 32,834 kbpd. August’s output was 32,755 kbpd. The largest reductions in output occurred in Libya, Gabon, and Venezuela.
WTI crude opened at $48.12/b this session, a recovery of $0.54 from yesterday’s opening. Currently this morning, WTI prices are $48.42/b, up by $0.30 since today’s opening. The daily price range has been $47.73-$48.44/b.