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Why oil prices keep falling with United States refineries knocked out by storm

31 August 2017, 01:42 | Lionel James

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International Brent crude futures closed up 11 cents or 0.2 percent to $52.00 a barrel.

Oil prices in the United States tanked during Wednesday's trade in the wake of storm Harvey which cut U.S. demand for crude, the most important feedstock for the petroleum industry.

Gasoline prices surged but crude oil prices were lower Monday morning as Hurricane Harvey continued to wreak havoc on Houston-area refining.

The Gulf of Mexico alone accounts for 20 percent of U.S. oil production, and many rigs were also knocked out by the storm.

The national USA gasoline price on Monday stands at $2.38 per gallon, up more than 5 cents from a week ago.

"Although this is less than 20 percent of total refining capacity in the USA, the Gulf Coast region is a major supplier of refined products both locally, and into other parts of the country", Delaney said.

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US West Texas Intermediate (WTI) crude futures were at Dollars 46.35 per barrel at 0155 GMT, down 9 cents from their last close. The discount for U.S. WTI versus Brent reached $5.92 a barrel on Tuesday, its widest in more than two years. The contract's peak was $1.7888, the highest for NYMEX gasoline since July 2015.

About 22 percent of U.S. Gulf of Mexico oil production is offline due to Tropical Storm Harvey, the U.S. Department of the Interior's Bureau of Safety and Environmental Enforcement (BSEE) said on Sunday.

Motiva Enterprises chose to close its 603,000bpd plant in Port Arthur, Texas, while Total halved the output of its refinery, which is in the same area. Onshore, numerous nation's refineries remain offline because of heavy flooding in and around the Houston area.

Oil investors are bracing themselves for a turbulent week as Hurricane Harvey continues to tear through Texas - the core of the U.S. oil industry.

Crude markets were also looking at disruptions in Libya and Colombia.

"Around 2-3 million bpd (barrels per day) of refining capacity is offline or in the process of shutting down". Jefferies bank said it was lowering its fourth-quarter Brent oil price estimates to $55 a barrel from $60 and its 2018 forecast to $57 from $64.



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