Oil prices hover at $43 as Gulf Coast hurricane recovery begins

NEW YORK (Bloomberg) --Oil edged lower with U.S. Gulf Coast facilities shifting to recovery mode after Hurricane Laura and traders turning their attention to viral flare-ups dimming the prospects for a recovery in global fuel demand.

Futures in New York oscillated between minimal gains and losses on Friday, with average trading volumes in August plunging to multi-year lows. The storm was one of the most powerful hurricanes to ever hit Louisiana. Yet, it mostly spared the region’s oil refineries and facilities are now in the process of restarting.

Exxon Mobil Corp. has begun restarting its Beaumont and Baytown refineries in Texas after shutting them due to the storm. Meanwhile, some facilities may take longer to return to normal, with Citgo Petroleum Corp.’s refinery in Lake Charles, Louisiana, possibly being shut for up to six weeks after suffering damage from the hurricane.

“Gasoline demand is still low, inventories are high” amid the pandemic, said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “So if there ever was a time where we could tolerate losing some refining capacity, it would be now.”

Traders are shifting their attention back to the prospects for a rebound in oil consumption, with U.S. benchmark futures still stuck struggling to rally past $43 a barrel as surging Covid-19 cases around the world depress demand. Chancellor Angela Merkel warned Germans that the situation would get tougher as the summer draws to a close, at a time when infections are rising across Europe. Meanwhile, Peru set another grim record by reporting the highest number of deaths per capita from the coronavirus, becoming the world’s deadliest Covid hotspot.

“Market participants will return their focus towards the recovery in global energy demand, which continues to show signs of stalling,” TD Securities commodity strategists including Bart Melek said in a note. “This comes amid virus flare-ups in Europe and Asia, which threaten to derail the recovery in demand growth.”

Prices:

• West Texas Intermediate for October dipped 9 cents to $42.95 a barrel at 11:10 a.m. in New York.
• Brent for the same month, which expires Friday, lost 8 cents to $45.01 a barrel.

In a sign that China’s thirst for oil imports is waning, the number of supertankers hauling crude to the country slid to its lowest level since late March, according to ship-tracking data compiled by Bloomberg. The number of very large and extra-large crude carriers signaling China in the next three months dropped by two to 79 in the past week, compared with a seasonal average of about 88 tankers.

Meanwhile, the slowdown in demand is resulting in weaker margins for producing fuels, reducing the incentive for refiners to purchase more crude. In Europe, profit from turning crude into diesel weakened to its narrowest since June on Thursday, while that for gasoline in America was its lowest since April.