Gasoline Surges, Oil Steady as Harvey Shuts Texas Refineries

With Texas producing almost three-quarters of the U.S’s supply of ethylene—considered one of the world’s most important petrochemicals—it is becoming increasingly evident that Hurricane Harvey’s effects will be felt across the nation

With Texas producing almost three-quarters of the U.S’s supply of ethylene—considered one of the world’s most important petrochemicals—it is becoming increasingly evident that Hurricane Harvey’s effects will be felt across the nation

Oil prices rose on Tuesday after OPEC forecast higher demand in 2018 and Russian Federation and Venezuela confirmed their commitment to a production - cutting deal to reduce the global crude glut.

Members of the Organization of Petroleum Exporting Countries and other producers including Russian Federation have pledged to reduce crude output by about 1.8 million barrels a day through March to trim global oil inventories and buttress prices.

"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly", the IEA, which coordinates energy policies in industrialized nations, said in its monthly report.

Robust demand in industrialized countries was a key factor behind global demand growing 2.3 million bpd in the second quarter, the highest quarterly year-on-year rise since mid-2015.

For months, the oil cartel OPEC has anxious about what it should be doing as its plan to restrict its collective crude production (and hopefully kick off a price rebound) was failing.

It was the first fall in global production in four months.

The IEA report confirmed the same trend highlighted in OPEC's August report out the day before.

The 12 members of OPEC bound by a supply-cutting pact raised their compliance to 82 percent in August from 75 percent in July. The producers are seeking to strengthen compliance with the reduction accord they reached previous year.

According to EIA, the global oil surplus is beginning to shrink due to stronger-than-expected European and USA demand growth, as well as production declines in OPEC and non-OPEC countries.

Crude stocks at the Cushing, Oklahoma, delivery hub for USA crude futures rose by 1 million barrels, EIA said.

Gasoline stockpiles fell 8.4 million barrels for the week, the EIA said - the largest fall on record and due to the impact of Harvey on Gulf Coast refineries. 79,000 bpd won't cut it, but on the demand side there's more working in the favor of a rebalanced market, as OPEC expects oil demand will increase by more than previously expected in 2018.

"OECD product stocks were only 35 million barrels above the five-year average at end-July", the IEA said. The Brent premium to WTI hit the highest level for two years ($US5.86 a barrel) thanks to the supply disruptions along the US Gulf Coast.

Oil supply from outside of OPEC is expected to grow by 780,000 b/d in 2017, unchanged from last month's report, to 57.8 million b/d. OPEC's current production is still slightly higher than the amount of crude the group estimates will be needed from the cartel this year, at around 32.7 million barrels a day (b/d).

The IEA also said the impact from Hurricane Harvey on US oil markets in the Gulf Coast was easing and its impact on global markets was likely to be relatively short-lived, although it would possibly help inventories rebalance more quickly. It said the United States should strengthen its energy security to address hurricanes, by steps such as adding oil products to government-held inventories.

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