Oil Price Fundamental Daily Forecast – It May Take Weeks for U.S. to Return to Full Capacity

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed mixed on Thursday as traders responded differently to current events. U.S. oil continued to get a boost from U.S. refiners restarting after Tropical Storm Harvey, however, gains were limited by new disruptions caused by Hurricane Irma.

October WTI crude oil settled at $49.09, down $0.07 or -0.07% and December Brent crude oil ended the session at $54.33, up $0.26 or +0.48%.

U.S. Texas Gulf Coast facilities were slowly recovering from the devastating effects of Harvey, which hammered Louisiana and Texas almost two weeks ago, shutting key infrastructure in the heart of the U.S. oil and natural gas industry.

In other news, the U.S. Energy Information Administration (EIA) said on Thursday that refinery utilization rates slumped 16.9 percentage points to 79.7 percent last week, the lowest rate since 2010.

Additionally, the EIA report said commercial U.S. inventories rose 4.6 million barrels the week-ending September 1, to 462.35 million barrels. However, U.S. oil production was also affected by the storm, with weekly output down from 9.5 million bpd to 8.8 million bpd.

 Forecast

Crude oil prices are little changed early Friday as the market continues to be controlled by the potential impact of hurricane Irma on the Caribbean and Florida and last week’s damage to the Texas Gulf Coast oil industry by Hurricane Harvey.

Hurricane Harvey which hit two weeks ago led to the shutdown of all refineries in the region. Hurricane Irma does not pose a threat to oil production but it is likely to have an impact on demand for gasoline.

Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also impacted shipping. Imports of oil into the U.S Gulf Coast fell to levels not seen since the 1990s.

The price action in crude oil is currently being driven by momentum and technical traders. The data this week and the next will have very little impact on the movement of the market because the underlying trend in the market will be obscured by the effects of the hurricanes.

Traders are saying it may take weeks for the U.S. petroleum industry to return to full capacity, ant that under the current conditions it was difficult to identify fundamental market trends.

The October West Texas Intermediate crude oil chart is showing major support developing at $48.63. If a support base is built then look for this action to create enough upside momentum to trigger a possible rally into $50.51 over the near-term.

If $48.63 fails as support then look for profit-taking to drive the market into at least $48.05. A break under this level will indicate that investor sentiment is shifting to the downside.