Crude Oil Price Analysis for August 30, 2017
Hurricane Harvey continued to wreak havoc on the oil markets. Historic amounts of rain have dropped in Houston and the surrounding refining areas. Unfortunately, the rain is not over, and will continue over the next few days. Refiners have shut in, which has curtailed demand for crude oil, but at the same time, shale producers have stopped production, which has offset some of the lack of demand.
Technicals
Crude oil prices broke down on Monday and continue to trade under pressure. Traders await Wednesday’s EIA inventory numbers. Prices failed to test resistance near an upward sloping trend line that coincides with the 10-day moving average at 47.57. Support is seen near the weekly lows at 45.76. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices for crude oil.
Refiners continue To Shut In
ExxonMobil shut down its Baytown refinery, the second largest in the United States with a capacity of 560,500 barrels a day. Royal Dutch Shell closed its 360,000 barrels a day Deer Park refinery and Phillips 66 shut down its 247,000 barrels a day Sweeny refinery. All port facilities in Houston and Corpus Christi were also shut down on Monday, not open to vessel traffic.
The implications of the refinery outages and the port closures could be dramatic, although how long it will last is uncertain. The first obvious effect is a disruption to the production of refined products, which could have substantial effects on the U.S. fuel supply. As of Monday morning, more than 2.3 million barrels of daily refining capacity was knocked offlineor about 13 percent of the nation’s total. That has already forced gasoline futures up by 7 percent to their highest levels in two years.
The effects will reverberate well outside of Texas. For example, the massive refineries on the Gulf Coast send gasoline through a major artery to the U.S. Mid-Atlantic and Northeast. The disruption will mean that much of the country could see higher gasoline prices soon. The Gulf Coast also exported 2.7 mb/d of refined products in May, much of which was sent to Latin America and Europe.
Bombing in Columbia Shut in Crude Oil
A bombing of the Cano Limon oil pipeline in Colombia has led to the suspension of crude flow, sources from Ecopetrol and Colombia’s army told Reuters. Leftist militant group ELN was behind the attack, the sources said, who declined to be identified ahead of an official announcement. Some crude oil spilled as a result of the bombing in a nearby river.
Cano Limon is Colombia’s second-biggest oil pipeline, with a daily capacity of 210,000 bpd, which carries crude oil from the Cano Limon field near the border with Venezuela to a refinery on Colombia’s Caribbean coast. The Cano Limon field and the 780-km pipeline are jointly operated by Ecopetrol and Occidental Petroleum.
The attack against the Cano Limon infrastructure is the latest in a string of bombings over a period of 17 years, resulting in 167 deaths and the spilling of a total 66 million gallons of crude, Reuters notes, citing figures from Ecopetrol. Because of the attacks, the Cano Limon pipeline has been shut down for almost a third of its life so far.
Japan Employment Rate was Unchanged
Japan’s employment rate was unchanged at 2.8% in July and the availability of jobs improved for the fifth straight month to reach the highest level since 1974. The seasonally adjusted unemployment rate matched economists’ median forecast. The jobs-to-applicants ratio rose to 1.52 from 1.51 in June, also matching the median forecast.
The Dollar Tumbled Buoying Crude Prices
Trump warned N. Korea that “all options are on the table” and “N. Korea has signaled its contempt for its neighbors, for all members of the United Nations, and for minimum standards of acceptable international behavior.” This weighed on the dollar, and since crude is priced in dollars, it somewhat buoyed crude oil. Following N. Korea’s missile launch over Japan, he said “the world has received N. Korea’s message loud and clear.”
This article was originally posted on FX Empire
