Crude falls as flooding from Harvey roils U.S. oil industry

U.S. crude futures fell in Asian trading on Friday, partly reversing sharp gains from the previous session, amid ongoing turmoil in the oil industry with nearly a quarter of U.S. refining capacity offline.

U.S. West Texas Intermediate (WTI) Clc1 was down 27 cents, or 0.6 percent, at $46.96 barrel at 0434 GMT. The contract rebounded 2.8 percent on Thursday but is still heading for a weekly decline of 1.9 percent. 

The new Brent LCOc1 contract for November delivery was down 8 cents, or 0.2 percent, at $52.78 barrel. The contract for October delivery, which ended trading on Thursday, closed up $1.52, or 2.99 percent, at $52.38 a barrel. 

U.S. gasoline futures have rallied more than 28 percent to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the U.S. Labor Day weekend’s traditional surge in driving. 

Gasoline for September delivery settled up 25.52 cents, or 13.5 percent, at $2.1399 on the last day of trading in the contract. Gasoline for October delivery RBc1 was down 0.2 percent at $1.7750. 

“It looks like everyone thinks that the hurricane will affect refining more than production,” said Tony Nunan, oil risk manager at Mitsubishi Corp. “Production will come back faster than refining so it is just going to exacerbate the situation where there’s too much oil.” 

U.S. crude stocks fell sharply last week even as refineries hiked output in the run up to Harvey’s approach, the Energy Information Administration said on Wednesday.

That should encourage OPEC and non-OPEC members that are trying to restrict supplies to boost prices that are about half the level of three years ago. 

But market rebalancing may take longer than expected if production comes back in the United States and refiners cannot feed that output into flooded refineries.