Oil weakens on fears Irma could dent United States demand

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

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

US crude futures rose 17 cents, or 0.35%, to $48.24 a barrel on the New York Mercantile Exchange.

Gold is retreating as the safe-haven demand fades. Benchmark Brent crude has lost 6 per cent this year and was trading at $53.81 a barrel at 11.10am UAE time on Tuesday. The original six-month agreement has already been extended once, by nine months.

The firm said "given the only modest impact Harvey had on oil production, the combined demand loss generated by these two hurricanes will be a bearish shock for global oil balances in September". The increasing numbers of operating rigs, as well as increasing production, have been raising concerns that the USA shale oil producers which were able to cut their production cost dramatically over the past years are now a low-priced global competitor and would continue to undermine the OPEC agreement to cut supplies.

The longer-term focus, however, was on a possible extension to the 15-month production pact between members of the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russian Federation.

Saudi Arabia and Venezuela, both members of OPEC, agreed to consider prolonging production cuts "beyond the first quarter of 2018, if needed", the Saudi ministry said in one of the statements.

Hurricanes have shaken energy markets, with Irma shutting fuel stations and ports across Florida and Harvey strangling refineries in the nation's energy hub. Refineries are restarting in Texas.

Governor orders evacuations of SC barrier islands as Irma approaches
Major coastal flooding is possible, threatening to cut off many coastal areas, including routes to and from barrier islands. But Derrec Becker with the South Carolina Emergency Management Division said the path is too uncertain for people to relax.

A measure of second-month WTI implied volatility slid to the lowest level since April, data compiled by Bloomberg show.

In a "dramatic situation" like a hurricane, there is going to be "a lot of volatility in the numbers", he said. "That's why you have to look out further".

"The global economy continues to hum along, though political headwinds and weather conditions have complicated matters in recent weeks", a report published Tuesday by the National Bank of Kuwait read.

The deal agreed late past year to reduce output by about 1.8 million bpd until March 2018 helped to keep prices as high as $58 a barrel in January, but they have since sagged as global stocks have not fallen as quickly as expected. Consequently, at the current 2.2 barrels per day output, Nigeria would generate $22 million as its daily excess oil revenue, meaning that at the official exchange rate of N305 per a dollar, Nigeria would generate N610 million daily.

The firm noted it doesn't expect Irma, which made landfall Sunday in Florida, to have an impact on oil production or processing.

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