Oil prices fall on stronger US dollar, concerns over Hurricane Harvey

Oil prices down, gasoline prices rise

On Thursday, oil prices dropped and gasoline prices rose amid concerns over crude demand as refineries in the US Gulf Coast region shut down operations in preparation for Hurricane Storm Harvey.

By 4:54 p.m., Brent crude was trading at $52.13/barrel, down 44 cents and US WTI was down by 83 cents, trading at $47.58.

According to the US National Hurricane Center, Harvey is gaining strength and is expected to hit the middle Texas coast on Friday, making landfall on Friday night or early Saturday and will stall near the middle Texas coast through the weekend.

The Miami-based USNHC upgraded Harvey from a tropical storm to a category 1 hurricane on Thursday.

Two refineries located in Corpus Christi, Flint Hills Resources 296,470 barrels per day facility and Citgo’s 157,000 b/d plant were shutting down Thursday.

Traders closely watching the situation say they are worried that other refineries may close as well due to flooding as Harvey is expected to dump between 12 to 20 inches of rain and, in some isolated areas, as much as 30 inches of rain.

Such refinery closures would impact crude demand.

As well, exports of oil and condensates will be affected.  NuStar Energy and Magellan Midstream Partners are shutting down their terminals in Corpus Christi ahead of the arrival of Harvey.

Offshore production of some oil and gas output at platforms in the gulf has been curbed by Shell, Anadarko and Exxon Mobil.

“Operators in the area are already closing down platforms and evacuating workers as a precaution,” Sukrit Vijayakar, director of energy consultancy Trifecta told Reuters.

Ahead of the storm, US gasoline margins and cash prices in the Gulf Coast rose to their highest levels in almost a year and margins are on track for their biggest percentage gain since February.

The National Hurricane Center reports Hurricane Harvey is located 335 miles south-southeast of Port O’Connor, Texas and has sustained winds of 80 miles per hour.

A strong US dollar also impacted oil prices.  Investors await a meeting of central bankers that begins on Thursday in Jackson Hole, Wyoming.  Reuters reports the meeting could signal changes to monetary policy.

“Today some of the pressure in the market might be attributed to the strength in the dollar,” Gene McGillian, manager of market research at Tradition Energy told Reuters.