US Hurricanes Affecting Oil Prices, Saudi Could Cut Output

Marathon Petroleum Corp. oil storage tanks sit at a terminal in the Ybor Channel ahead of Hurricane Irma in Tampa Florida U.S. Sept. 9 2017

OPEC Secretary General Mohammad Barkindo said on Monday a deal to cut supply would help the market rebalance and strong demand could further reduce oil inventories.

The hurricanes have rattled energy markets, with Irma shutting Florida fuel stations and ports and Harvey earlier halting about one-quarter of the nation's refining capacity.

Crude oil prices have formed a "Megaphone chart pattern" as prices failed to hold above the resistance line at $ 49.50 and above the 200-day moving average prices at $50.

Even so, USA crude stockpiles are likely to build in the next few weeks as refiners try to catch up with the backlog of oil stranded during the storms of the past two weeks, analysts said. Refining runs on the U.S. Gulf Coast hit a record low in the week to September 1, just after the storm, due to shutdowns.

The numbers, however, might not be indicative of the longer term supply demand picture, said Mark Watkins, regional investment manager at U.S. Bank. Refineries are restarting in Texas.

Power has been cut to 4 million homes in Florida as millions fled the state as Hurricane Irma moved up the coast.

Hurricane Irma is expected by Goldman Sachs to have a negative impact on oil demand, but the firm said it sees a larger hit to oil demand from hurricane Harvey, "given the large concentration of energy-intensive petrochemical activity in its path".

The front-month contract in USA crude's West Texas Intermediate (WTI) benchmark settled up $0.59, or 1.2%, at $48.07 per barrel on the New York Mercantile Exchange.

OPEC said inventories were falling and that an increase premium of Brent crude for immediate delivery over that for later supplies raised hopes that a rebalancing is under way.

The cartel's production dropped by 79,100 barrels per day (bpd) to 32.76m bpd last month, according to secondary sources that measure Opec output. The producers are seeking to strengthen compliance with the reduction accord they reached a year ago.

On Monday, Falih and his United Arab Emirates counterpart also agreed to consider an extension beyond March.

The kingdom and Kazakhstan said such an extension "would be considered in due course as market fundamentals may dictate", according to a separate Saudi statement.

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