Oil prices surge 3% as refineries restart after Harvey

Traders said that this price rise was a result of crude production outages following Hurricane Harvey.

Now the market is closely watching the next hurricane, "Irma", which reached the highest, the fifth category and is approaching the Caribbean islands.

USA retail gasoline prices climbed on Tuesday, even as oil refineries rumbled back into service after Hurricane Harvey disrupted operations along the Texas coast. Harvey also caused eight refineries in Texas to shut down, the largest being ExxonMobil's Baytown operation, which has a capacity of 584,000 barrels a day.

Several Gulf Coast refineries affected by the hurricane have restarted and some are running at reduced rates after being shut down during the storm; however, several refineries remain shut down.

On global markets, Brent crude futures LCOc1 also rose by 0.9 percent to $53.23 a barrel amid signals the Organization of the Petroleum Exporting Countries could extend its output limits beyond the first quarter of 2018.

The U.S. Environmental Protection Agency, meanwhile, granted a waiver on low-volatility conventional gasoline requirements to 12 more states to boost gasoline supply in areas hit by fuel shortages.

Houston and EPA officials are investigating a potentially hazardous plume of a carcinogenic substance in one neighborhood after a nearby oil refiner reported its operations suffered Harvey-related damage. At its peak, Harvey shuttered 27 percent of USA processing capacity.

"Generally speaking, little attention should be paid in the next few weeks to reports of crude and oil product stocks and trade given the numerous short-term disruptions", they said. Additionally, the extended closure of the Port of Corpus Christi and Port of Houston, including the Houston Ship Channel, will hamper US crude exports. We have also seen the spread between Brent crude and USA crude widen sharply, with Brent taking on a premium compared with the cheaper U.S. crude.

Crude has continued to gain support from expectations that refining capacity will gradually increase which will also underpin United States crude demand.

USA crude futures settled up $1.37 at $48.66 per barrel after trading earlier in the day as high as $48.98, a three-week high.

"The recovery from Hurricane Harvey has accelerated over the weekend, with prolonged dry weather helping the decline in flood levels", Goldman Sachs analysts led by Damien Courvalin wrote.

Hurricane Harvey may no longer be raining down on the Gulf Coast, but the storm's impact continues to drive up gas prices across the country.

  • Zachary Reyes