https://www.bloomberg.com/news/articles/2017-09-17/iea-sees-risk-of-volatile-oil-prices-on-weak-upstream-investment
Oil hit a wall again, failing to sustain a rally above $50 a barrel for a third straight session.
That’s
partly because demand typically drops this time of year as many
crude-processing plants shut down in the fall for maintenance. But it’s
also because producers are coming to the futures market whenever West
Texas Intermediate prices approach $50 to lock in profits. While that
protects them against a slump, it also makes it more difficult for
futures to rise further. Meanwhile, for the third time this month, a
hurricane is heading toward the Caribbean.
“We
are moving into the autumn period and that typically is a weaker period
seasonally for oil demand,” Harry Tchilinguirian, head of commodity
markets strategy at BNP Paribas SA in London, said by telephone. At the
same time, “$50 is pretty much the magic number which oil producers come
in and hedge. The price of WTI is up against a wall, a producer hedge
wall, and it’s going to be difficult to overcome that.”
While oil’s peaks above $50 have so far failed to stick,
futures have gained some strength after the Organization of Petroleum
Exporting Countries and the International Energy Agency boosted their
forecasts for global demand last week. In the U.S., shale producers are
set to churn a record 6.08 million barrels a day in October, according
to the Energy Information Administration.
WTI
for October delivery rose 2 cents to settle at $49.91 a barrel on the
New York Mercantile Exchange. Total volume traded was about 18 percent
below the 100-day average.
Brent for November settlement fell 14 cents to end the
session at $55.48 a barrel on the London-based ICE Futures Europe
exchange. The global benchmark crude traded at a premium of $5.13 to
November WTI.
U.S. refineries, including Phillips 66’s plant in Ponca City, Oklahoma, and Total SA’s Port Arthur, Texas, facility will start
seasonal maintenance this month. Other plants that were knocked offline
by Hurricane Harvey, including the nation’s largest, are still working to reach normal operating levels.
“We’re going to see some recovery in Texas but we’re also
going to see some reductions in refining activity in the rest of the
country,” Bill O’Grady, chief market strategist at Confluence Investment
Management in St. Louis, said by telephone. “Demand for crude will
probably stay pretty weak.”
Hurricane Maria
Hurricane Maria intensified into a major hurricane
on Monday and is expected to continue strengthening as it closes in on
the Leeward Islands, the National Hurricane Center said in an advisory.
Maximum sustained winds approached 125 miles (201 kilometers) an hour,
and Maria is not forecast to weaken as she rakes islands already
devastated by Irma.
Puma Energy plans to shut
its petroleum terminal in St. Thomas, U.S. Virgin Islands ahead of
Hurricane Maria, according to the company. Ports in Puerto Rico and the
U.S. Virgin Islands are scheduled to shut Tuesday in preparation for the hurricane, according to the U.S. Coast Guard.
Oil-market news:
- Cushing, Oklahoma crude stockpiles increased by 900,000 barrels in the week ended Sept. 15, according to a forecast compiled by Bloomberg.
- Permian shale basin drillers, once the darlings of the U.S. oil industry, now look like fat targets for acquisitions and activist investors, analysts at Stifel Nicolaus & Co. said.
- Saudi Arabian crude shipments dropped in July to their lowest level in almost three years as the world’s biggest oil exporter intensified efforts to curb supply to counter a global glut.
— With assistance by Ben Sharples, and Grant Smith
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