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OPEC oil price rises as Hurricane Harvey heads for US Gulf coast

OPEC oil price rises as Hurricane Harvey heads for US Gulf coast
The price of OPEC basket of fourteen crudes stood at 49.76 US dollars a barrel on Thursday, compared with 49.49  US dollars a barrel on Wednesday, according to OPEC Secretariat calculations. 

Oil prices rose on Friday as the US petroleum industry prepared for potential output disruptions as Hurricane Harvey headed for the heart of the nation’s oil industry in the Gulf of Mexico, according to Reuters.

The storm has rapidly intensified since Thursday, spinning into potentially the biggest hurricane to hit the US mainland in 12 years and taking aim between Houston and Corpus Christi on the coast of Texas.

US West Texas Intermediate (WTI) crude futures CLc1 were at 47.76  US dollar a barrel at 0534 GMT, up 33 cents, or 0.7 percent, from their last settlement.

International Brent crude futures LCOc1 were at 52.42 US dollars per barrel, up 38 cents, or 0.7 percent, from their last close.

Prices rose as production in the affected area shut down in preparation for the hurricane, and on expectations that closures could last if the storm causes extensive damage.

“Damage and flooding to refineries and shale fields, disrupted production in the Gulf of Mexico and infrastructure damage are unlikely to be bearish for WTI,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.

US gasoline prices RBc1 have shot up by almost 10 percent since Wednesday to 1.73 US dollars per gallon, their highest level since April as refiners also shut down in preparation to the storm.

The Port of Corpus Christi, Texas, was closed to vessel traffic, a spokeswoman for the city’s Port Authority said on Thursday. Oil refineries in the city operated by Citgo Petroleum, Valero Energy Corp and Flint Hills Resources also began shutting down ahead of the storm.

Beyond the storm’s potential impact on the oil industry, crude remains in ample supply globally despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to hold back production in order to prop up prices.

OPEC, together with non-OPEC producers including Russia, has pledged to cut output by around 1.8 million barrels per day (bpd) this year and during the first quarter of 2018.

However, not all producers have lived up to their pledges and supplies remain high, resulting in the ongoing low prices.

A joint OPEC, non-OPEC monitoring ministerial committee said on Thursday that an extension to the supply-cut pact beyond March was possible, though not yet decided.

Part of the reason for the crude glut has been rising US production, which has jumped by 13 percent since mid-2016 to 9.53 million bpd, close to its 9.61 million bpd record from June 2015. C-OUT-T-EIA

Because of soaring US output, the discount of WTI crude to Brent on Friday rose to its widest in almost two years at 4.69 per barrel. CL-LCO1=R

Deeply discounted WTI makes US crude exports attractive, and Thomson Reuters Eikon data shows shipments to Asia hit a record of over 300,000 bpd during the first half of the year.

The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).