(Bloomberg) — Oil rose for a fourth week in a row as U.S. Gulf Coast refineries began restarting though gains were capped as investors shifted their focus from the storm toward the fragile rebound in consumption amid the pandemic.
WTI was little changed on Friday and notched a 1.5% gain for the week. While Laura was one of the most powerful hurricanes to ever hit Louisiana, facilities in southeast Texas avoided the worst of the storm, allowing infrastructure there to start the recovery process.
Among those facing more extensive repairs, Citgo Petroleum Corp. said its refinery in Lake Charles, Louisiana, sustained damage from high winds and likely won’t see an immediate restart. Despite the hiccup in production, U.S. gasoline stockpiles remain at their highest seasonal level in decades.
“Gasoline demand is still low, inventories are high” as the pandemic persists, said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “So if there ever was a time where we could tolerate losing some refining capacity, it would be now.”
Refining margins for combined gasoline and diesel jumped 12% on Friday due to refinery closures in Southeast Texas and Louisiana because of Hurricane Laura. But the hurricane-related surge in U.S. Gulf Coast gasoline cracks likely won’t last, “given the ample unutilized capacity elsewhere and high product inventories,” according to a Jefferies report dated Thursday.
The pace of Covid-19 infections rose further in key European countries and German Chancellor Angela Merkel warned that more sacrifices lie ahead after the summer.
“The focus seems to be more on the demand front than supply at this point,” said Josh Graves, senior market strategist at RJ O’Brien & Associates LLC. “Until they get a vaccine developed and people are comfortable traveling again then you’re going to see much interest in being long energy markets, let alone being long crude.”
- West Texas Intermediate for October dipped 7 cents to settle at $42.97 a barrel. Futures posted a 1.5% weekly gain.
- Brent for the same month, which expires Friday, lost 4 cents to end the session at $45.05 a barrel. The contract rose 1.6% this week.
- Gasoline futures rose 2.4% to $1.3155 a gallon.
In a sign that China’s thirst for oil imports is waning, the number of supertankers hauling crude to the country slid to its lowest level since late March, according to ship-tracking data compiled by Bloomberg. The number of very large and extra-large crude carriers signaling China in the next three months dropped by two to 79 in the past week, compared with a seasonal average of about 88 tankers.
Meanwhile, the slowdown in demand is resulting in weaker margins for producing fuels, reducing the incentive for refiners to purchase more crude. In Europe, profit from turning crude into diesel weakened to its narrowest since June on Thursday, while that for gasoline in America was its lowest since April.
Other market drivers
- SAExploration Holdings Inc., a seismic mapper of oil fields from Alaska to Australia, filed for bankruptcy with a plan to slash debt by $74 million and hand ownership to existing lenders.
- U.S. petrochemical plants may have avoided large-scale damage from Hurricane Laura, but precautionary shutdowns show how vulnerable the industry is to the threat from Mother Nature.
- Explorers returned to parking more rigs in the U.S. this week as stagnant oil prices pushes the industry to curtail activity.
–With assistance from Ann Koh, Alex Longley, Barbara Powell and David Wethe.
© 2020 Bloomberg L.P.