Early on Friday, oil prices were volatile as the market attempted to estimate the possible impact of Hurricane Harvey that’s heading for the heart of the U.S. oil industry, the coast of Texas.
Last Thursday, the tropical storm quickly intensified overnight, spinning into possibly the biggest hurricane in 12 years to strike the mainland U.S. and aiming at the heart of the nation’s oil refining industry.
The crude futures of the U.S. West Texas Intermediate (WTI) were up 29 cents at $47.72 a barrel at 0036 GMT, or 0.6 percent, from their last settlement
The international benchmark for oil prices, Brent crude futures, were up 32 cents at $52.36 per barrel, or 0.6 percent, from their previous close.
Traders noted that prices increased as oil production in the area affected has shut down in preparation for the hurricane.
The increase in prices came after crude dropped by 2 percent late in the previous session as refiners also closed down ahead of the storm, decreasing their short-term crude demand.
It is still unseen whether the storm will end up having a greater impact on crude supplies or refinery operations.
“Harvey… may disrupt both oil production and refining,” said investment analyst at Rivkin Securities, William O’Loughlin.
“Oil prices initially fell but rallied over the last few hours as traders realise that production disruption may be significant. The storm is certainly bullish for gasoline as refining outages would reduce gasoline supply,” he added.
Crude remains in sufficient supply globally despite the efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut back production to prop up prices.
Together with other producers including Russia, OPEC, has promised to lessen output by around 1.8 million barrels/day (bpd) in 2017 and during the first quarter of next year.
However, resulting in ongoing low prices, not all producers have lived up to their pledges and supplies remain high.
On Thursday, A joint OPEC, non-OPEC monitoring ministerial committee said that an extension to the supply-cut pact beyond March was ‘possible, though not yet decided.’