Oil rises as OPEC mulls output-limit extension, refiners recover

Aaron Brown
September 13, 2017

Hurricane Irma, which has been moving inland over the southeastern parts of the U.S., has affected at least nine states so far, among them Florida, Georgia, Alabama and SC, causing storm surges and flooding and cutting off power supplies.

U.S. West Texas Intermediate (WTI) crude was 17 cents higher at $48.24 a barrel.

Worldwide benchmark Brent crude edged 32 cents higher to $54.16 per barrel by 1235 GMT from the previous close.

Opec said its pact to reduce output, which includes Russian Federation among other producers, is beginning to cut into inventories.

The uptick in sentiment on oil prices comes against concerns that falling US oil demand could weigh on crude futures in the wake of Hurricane Irma which made landfall in the USA over the weekend.

OPEC on Tuesday forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut that has weighed on prices.

The latest inventories data will come back into focus with the API data due for release after Tuesday's NY close with the latest EIA data on Wednesday.

OPEC said inventories were falling and that an increase in the price of Brent crude for immediate delivery to a premium to that for later supplies raised hopes that a rebalancing is under way.

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According to an S&P Global Platts preview, EIA data could show a build of 10.1 million barrels for crude oil, but a drain on gasoline stocks of 4 million barrels.

The hurricanes have rattled energy markets, with Irma shutting Florida fuel stations and ports and Harvey earlier halting about one-quarter of the nation's refining capacity.

The two hurricanes are expected to inflict a "bearish shock" on oil balances in September, denting global demand by 900,000 barrels per day (bpd) and supply by about 300,000 bpd, Goldman said.

Stretching the duration of OPEC production limits by three months or more would fall under a worst-case scenario that ministers are now contemplating, the people said, asking not to be named because the talks were private.

Consequently, at the current 2.2 barrels per day output, Nigeria would generate $22 million as its daily excess oil revenue, meaning that at the official exchange rate of N305 per a dollar, Nigeria would generate N610 million daily.

The report from OPEC also highlighted that production outside the group fell in August, driven by disruptions in the USA after Hurricane Harvey rampaged through the oil producing regions in Texas and Louisiana.

"The drop in USA oil refining is also to be offset by higher processing at other nations, so worries over a substantial cut in crude oil demand are fading".

Other reports by Free-Prsite

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