The US Crude Oil Rise: Short Covering or Bulls Back in Action?

Ten refineries in the region were still shut down on Saturday morning, according to the Financial Times, with a combined total of about 2.9 million barrels per day of refining capacity, representing a whopping 16 percent of the US total, according to the Department of Energy. As of Tuesday, about 3.8 million barrels of daily refining capacity, or about 20%, was shut.

Seven analysts polled ahead of inventory report forecast that crude stocks last week likely rose 4.7 million barrels after nine straight weeks of drawdowns, while refined product inventories were seen lower.

Oil-market news. Saudi Arabia raised oil pricing for October sales to Asia, increasing its lighter grades for a second month, indicating the world’s largest crude exporter sees strengthening demand in its biggest market. “I think WTI is going to stay weak for a while”.

The Energy Information Administration (EIA) earlier this year had forecast that technological and process improvements would lift USA production sharply, leading some analysts and executives to predict 10 million bpd by December. “It could be 50, it could be 60, depending on what the damage is to refineries”.

But then Harvey knocked out about a quarter of US refining capacity and shuttered transport routes for crude, gasoline, diesel and other products.

It’s anybody’s guess what the EIA will put out, and it will certainly be closely-watched.

Some crude oil pipelines have restarted operations.

The total oil and gas rig count in the United States, post Harvey, now stands at 943 rigs, up 446 rigs from the year prior, with the number of oil rigs in the United States flat this week and the number of gas rigs increasing by 3.

Alberto Hernandez, a watch supervisor at the U.S. Coast Guard, said on Monday there were ships exiting and entering the Houston Ship Channel, which links the busiest petrochemical port to the Gulf of Mexico, on Monday.

To be sure, the bottleneck at the point of refining is starting to ease. It’s fifth refinery will be back online near the end of September.

No refineries have returned to normal rates, but at least four are operating at reduced rates. A major reason behind Harvey’s more muted impact on gasoline prices was the ability to redirect U.S. gasoline exports to American markets.

Coast Guard aircrews conduct flyovers to assess the ports of Houston, Texas City, Freeport and Galveston, on August 31, 2017.

Americans are certain to notice the effects immediately, especially as the country hits the roads for the busy Labor Day weekend. U.S. benchmark West Texas Intermediate (WTI) futures traded eight cents higher at $47.37 per barrel as demand for oil recovered.