Crude slips as market assesses hurricane damage

In this Nov. 22, 2013 file photo, the Centenario deep-water drilling platform stands off the coast of Veracruz, Mexico in the Gulf of Mexico. (AP)

LONDON: Crude prices slipped lower on Tuesday as the market grappled with the shutdown of 13 percent of refining capacity in the US after a hurricane ripped through the heart of the country’s oil industry.
The refinery closures helped to push US gasoline futures to a two-year high of $1.7799 per gallon on Monday, though they had receded to $1.7466 by 1325 GMT on Tuesday.
International Brent crude futures were down 7 cents at $51.82 a barrel, having traded as high as $52.19 and as low as $51.36 earlier in the day.
US West Texas Intermediate (WTI) crude edged down 24 cents to $46.33 after falling more than 2 percent in the previous session and trading as high as $46.96 earlier in the day.
The damage assessment could lead to more volatility. Some refineries were preparing for restarts, but heavy rains are expected to last through Wednesday, adding to catastrophic flooding in Houston.
“Refineries in Asia should run much harder to make up for (US closures), which is supportive for Brent,” said Olivier Jakob, managing director of oil analysis firm PetroMatrix.
Refineries in Europe and Asia were already gearing up to replace the lost oil products, while the International Energy Agency (IEA) said it could release emergency oil stocks in the event of extended outages.
Still, Jakob warned that the scale of US upstream outages is not yet clear and extensive damage to oil fields or pipelines could boost WTI prices.
Tropical Storm Harvey, which has now been downgraded from a hurricane, hit oil refiners harder than crude producers.
“Around 2-3 million bpd (barrels per day) of refining capacity is offline or in the process of shutting down... (and) more than 500,000 bpd of oil production... is offline,” Barclays bank said.
It added that the storm’s impact would “linger for several more weeks.”
As a result, the discount for US WTI versus Brent surpassed $5 a barrel, its widest in more than two years. Crude markets were also eyeing disruptions in Libya and Colombia.
In Libya, militia pipeline blockades closed three oil fields and forced state-run National Oil Corp. to declare force majeure at several sites.