Oil prices are moving higher for a 3rd straight day, encouraged by a pair of bullish monthly reports from OPEC and the IEA and the ongoing recovery efforts from the pair of hurricanes to hit the US in the past month. What different today is that refined products are moving in tandem with oil prices so far, something that we often take for granted, but that was scarce in the weeks following Harvey’s attack on US refineries.
Gulf coast cash markets for both gasoline and diesel price tumbled sharply Tuesday – even though futures were moving higher most of the day – in the surest sign yet that the post Harvey recovery efforts are progressing. Terminals in Tampa and Pt. Everglades Florida seemed to be operating near full strength Tuesday, although long lines at terminals, treacherous roads and power outages are still expected to hamper the post Irma recovery.
Yesterday the API was said to report US Crude inventories increasing by 6 million barrels while gasoline stocks were down almost 8 million barrels, and diesel stocks were down 1.8 million. Those figures are right in line with what you might expect with around 2 million barrels/day of refining capacity still offline following Harvey, although some are predicting even more dramatic figures in today’s EIA report.
Similar to OPEC’s report yesterday, the IEA this morning is projecting an uptick in global demand for oil products this year, even though Harvey & Irma will weigh on US consumption in the third quarter.
A note on how critical the US Gulf Coast has become to global markets from the IEA’s Oil Market Report:
While the industry responded much better than a decade ago when severe storms hit the Gulf Coast, the region nowadays is more important to the global oil market. For a long time it has been a production and refining hub; today it is an important global trading centre with more than 4 mb/d of products and 0.8 mb/d of crude oil being exported… The rise of the Gulf Coast as a major energy hub means that, in some respects, it can be compared to the Strait of Hormuz in that normal operations are too important to fail.
Hurricane Jose continues on its Atlantic loop and should begin heading north again over the weekend. The likelihood of an east coast landfall has declined over the past 2 days, but it still can’t be completely ruled out as some models still show the storm making a run at Cape Cod next week.