Hurricanes Harvey and Irma to support crude oil prices; buy on dips

Oil Rises As U.S. Refineries Restart Irma Wanes

Oil Rises As U.S. Refineries Restart Irma Wanes

Helping to limit gains was a stronger U.S. Dollar which could have an impact on demand.

Meanwhile, the market continued to assess Hurricane Irma's effect, as many refineries are restarting right now and lifted demand for American crude. Production among the Organization of the Petroleum Exporting Countries fell from its 2017 peak in July as the bloc took efforts to comply with its previous agreement.

Some bearish investors are saying the OPEC data was not a true assessment of production because the numbers were lowered by unrest in Libya which contributed the country's 112,300-barrel decline in August's production.

Much of that was because of a near 10 million-barrel increase in stocks in the U.S. Gulf region and as crude production rebounded from a brief Harvey interruption.

Meanwhile, the Energy Information Administration will report weekly USA crude stockpile and production data at 10:30 a.m. Wednesday.

USA gasoline prices, however, fell despite a record drawdown in inventories of the motor fuel.

Oversupply has kept a lid on oil prices which have hovered in a tight range of US$50-52 per barrel for Brent crude and US$47-49 per barrel for West Texas Intermediate crude.

Brent crude, the global benchmark for oil, settled just higher, despite Saudi Arabia and the United Arab Emirates saying they were open to extending production cuts for the Organization of the Petroleum Exporting Countries (OPEC) when the cartel's deal with Russian Federation and other global producers to reduce 1.8 million barrels per day expires in March 2018.

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Gasoline stockpiles were down 8.4 million barrels for the week, while distillate stockpiles fell 3.2 million barrels, according to the EIA.

The strength of the USA dollar-which plays a role in the price of oil (a stronger US dollar drives the price of oil down)-is on a slight decline trend, EIA also said.

Cushing inventories recorded a build of 1.02mn barrels on the week which was close to consensus expectations.

Keeping aside the impact of the twin hurricanes, the oil market remains extremely choppy in the recent weeks and the IEA and OPEC monthly reports may provide definitive price triggers.

Oil prices dropped on Monday on concerns that Hurricane Irma's pounding of heavily populated areas of Florida could dent oil demand in the world's top oil-consuming nation.

On Friday, WTI lost 3.3%, causing its discount to Brent to blow out to beyond $6 a barrel, the highest for 2017.

Both U.S. product futures ended lower - gasoline dropped 0.7 percent and heating oil fell 1.4 percent.

Prices received additional support amid reports that Saudi Arabia's oil minister discussed possibly extending a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts.

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