Oil Ends Mixed As Fears Spike Over Hurricane Laura

Investing.com - Crude prices settled mixed on Wednesday as a sharp U.S. inventory drawdown was offset by worries about a potential slump in fuel demand from inactivity likely to be caused by a hurricane headed for the Big Oil state of Texas.

New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled up just 4 cents, or 0.09%, at $43.39 per barrel.

London-traded Brent, the bellwether for global crude prices, closed the New York session down 22 cents, or 0.5%, at $45.64.

Up to 90 percent of U.S. crude production on the Gulf of Mexico, accounting for 1.5 million barrels per day, has been idled by Hurricane Laura, which was barreling toward the region as a Category 4 storm. News reports said Laura had potential for a 20-foot storm surge that forecasters said would be "unsurvivable" and capable of sinking entire communities. Authorities implored coastal residents of Texas and Louisiana to flee.

A bevy of refineries in southeastern Texas and southwestern Louisiana were also shutting, Platts reported. Among them were Motiva’s 600,000-bpd refinery and chemical operations in Port Arthur; ExxonMobil’s 366,000-bpd refinery in Beaumont; Total’s 225,500-bpd refinery in Port Arthur and Valero’s 335,000- bpd Port Arthur refinery.

Hurricane Laura is targeting Texas just as the US oil industry steadies from demand destruction caused earlier in the year by the coronavirus pandemic. 

The Energy Information Administration has reported a drawdown of nearly 30 million barrels from U.S. crude stockpiles over the past five weeks, suggesting that refiners were near to their typical summer time production of fuels despite life in the United States still being largely crimped by coronavirus-related precautions. But the shutdown in Texas, which operates 47 out of the 135 refineries in the country, could deal a fresh blow to demand for fuels.

Earlier on Wednesday, the EIA reported that crude inventories fell by 4.7 million barrels last week, versus expectations for a draw of 3.7 million barrels after a decline of  1.6 million the previous week. 

Oil stored at Cushing, Oklahoma, fell 279,000 barrels last week, the EIA said. Gasoline inventory dropped by a more than expected 4.6 million barrels.

"For a fifth week in a row, we’ve had a draw in crude stocks, and gasoline stockpiles have added to the bullish fervor as well with an outsize drop contrary to expectations," said Investing.com analyst Barani Krishnan. 

"Yet, the anemic price action tells us the market is more worried about the oil platform shut-ins on the U.S. Gulf Coast of Mexico over fears about Hurricane Laura."

Krishnan adds that there are more concerns about what the outage could do to demand than to production. 

"For the first time in more than a month, the EIA estimated a production hike of 100,000 barrels for last week. While that’s nothing in the grand scheme of things, it’s still something to keep in mind after the first double-digit climb in oil rigs in more than a year announced by Baker Hughes last week. 

“All in, the outlook for oil remains murky despite these gargantuan crude draws.”

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