Published: Wed, September 13, 2017
World | By Carl Welch

Oil mixed amidst Irma demand fears, Saudi cut extension talks

Oil mixed amidst Irma demand fears, Saudi cut extension talks

USA crude settled up more than 1% on Monday, paring some of its huge discount to global oil benchmark Brent, as Hurricane Irma's initial damage on the domestic oil industry look more contained than thought. More recently Hurricane Irma left more than seven million homes without electricity in Florida.

Hurricane Harvey, the storm that struck Texas more than two weeks ago, will remain a bigger concern for the oil market than Hurricane Irma which weakened Monday to a tropical storm, Goldman Sachs said.

Global benchmark Brent crude futures, the benchmark for oil prices outside the USA, fell 0.30% to $53.62 a barrel.

Brent crude rose 53 cents or 0.9 percent to $54.37 per barrel by 11:56 a.m.(1556 GMT).

OPEC and other producers including Russian Federation pledged to reduce output by about 1.8 million barrels a day through March to trim global oil inventories and buttress prices.

The uptick in sentiment on oil prices comes against concerns that falling US oil demand could weigh on crude futures in the wake of Hurricane Irma which made landfall in the USA over the weekend.

OPEC has been looking to boost prices through production cuts amid a supply glut that has more than halved oil prices over the past two years.

The Organization of Petroleum Exporting Countries and its allies may keep output cuts in place well into the second half of next year, according to people familiar with the matter.

"It's hard to know at this point, but Harvey and Irma have likely caused a combined $150 billion to $200 billion in damage to Texas and Florida", Zandi said in a statement Monday.

"It is clear that the rebalancing process is under way", he said.

According to an S&P Global Platts preview, EIA data could show a build of 10.1 million barrels for crude oil, but a drain on gasoline stocks of 4 million barrels.

On Wednesday, the Energy Information Administration will release official figures.

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.

The deal agreed late previous year 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. It is also costing them market share to rivals, including partner Russian Federation and the U.S. The storm hit just over two weeks after Hurricane Harvey hobbled the U.S. Gulf Coast refining sector, knocking almost a quarter of its capacity offline.

OPEC and other major oil producers such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan reached an agreement in December 2016 to remove 1.8 million barrels a day from the market.

Saudi Arabia, Opec's de facto leader and the world's largest exporter, said Sunday that the country's energy minister Khalid al-Falih met with his Venezuelan and Kazakh counterparts to discuss an extension of Opec's supply-cut agreement.

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