Crude oil weakens on fears Irma could dent USA demand

A pump jack is seen at sunrise near Bakersfield

A pump jack is seen at sunrise near Bakersfield

WTI, the USA standard, declined as demand for oil from refineries has been slow to return to normal levels in the wake of Harvey (http://www.marketwatch.com/story/hurricane-harvey-could-cost-190-billion-be-worst-ever-us-natural-disaster-says-accuweather-2017-08-31).

USA crude oil prices rose and gasoline prices fell at the start of the holiday-shortened week as the gradual restart of refineries in the Gulf of Mexico that were shut by Hurricane Harvey raised demand for crude and eased fears of a serious supply crunch.

Andy Lipow, president of Lipow Oil Associates, told CNBC that while Irma is not a direct threat to oil production or refining facilities, it is still cause for concern: "the biggest issue we face is the storage terminal and distribution system in Florida, which consumes about 500,000 barrels per day of gasoline and receives about 90 percent of it by vessel".

Many U.S. Gulf Coast refineries were restarting, including the largest U.S. refinery.

It comes on the heels of Hurricane Harvey, which struck the United States oil hub of Texas two weeks ago, knocking out a quarter of the nation's refineries, many of which are now restarting operations.

US energy firms cut oil rigs for a third time in the past four weeks as a 14-month drilling recovery stalled, with energy firms reducing spending plans in response to falling crude prices.

Global benchmark Brent crude was down 5 cents, or 0.1 percent, at $53.79 per barrel by 0247 GMT from the previous close.

Southern Gulf Coast states, meanwhile, continue to pick up the pieces from Harvey, which struck a central part of the US energy sector in late August.

"There will be some demand lost - obviously Florida is a big gasoline demand center", Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd., said in a television interview.

Irma, a Category-4 hurricane also will probably make landfall in Florida by Sunday and could slow the pace at which limited energy infrastructure in the region is resuming operations.

The longer-term focus, however, was on discussions over a possible extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers, including Russian Federation and Kazakhstan.

Similarly, Hurricane Irma could lead to a drop in crude oil refinery demand in the short term.

Exxon Mobil Corp's 362,300-barrel-per-day (bpd) Beaumont, Texas, refinery which shut on August 30 due to flooding, may remain closed until the first week of October, sources familiar with plant operations said. Production fell due to Hurricane Harvey.

"Imports (of oil) to the US Gulf Coast fell to levels not seen since the 1990s", ANZ bank said.

Saudi Arabian Energy Minister Khalid al-Falih earlier discussed with his Venezuelan and Kazakh counterparts the possible extension of the global oil supply cut agreement beyond March 2018.

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