On Friday,oil prices were on the rise as the petroleum industry braced for a potential disruption as the “biggest Hurricane to Hit U.S. Mainland” headed for gulf of Mexico.
The storm has rapidly gained traction and it is bound to be the biggest spinning wonder to ever hit U.S. mainland in more than a decade. The hurricane will most likely hit between Corpus Christi and Houston on the coast of Texas.
At 0534 GMT, U.S West Texas Intermediate Crude Futures were already up 0.7% or 33 cents to trade at $47.76 a barrel.
Additionally, International Brent Crude futures were also up 0.7 percent from their last close.
Prices rose as a result of production shutdown in the affected areas and also riding on concerns of lengthened closures in case the hurricane causes extensive damage.
“Damage and flooding to refineries and shale fields, disrupted production in the Gulf of Mexico and infrastructure damage are unlikely to be bearish for WTI,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.
Since Wednesday, U.S. gasoline has gained about 10 percent to trade at $1.73 per gallon. This marked a new high since April when refiners also closed business to prepare for a storm.
Oil refineries in Corpus Christi, Texas, have started preparing for a storm. Flint Hills Resources and Citgo Petroleum and Valero Energy Corp oil refineries have already started shutting down in preparation for the hurricane.
Despite efforts by OPEC to prop up prices by reducing supply, there is still a glut in crude oil .
OPEC and some non-OPEC producers such as Russia have agreed to reduce output by about 1.8 million bpd by end of first quarter 2018.
However; the effect is yet to be felt since the supply remains high, resulting in the prevailing low prices.
One of the reasons for the crude glut is the rising production by U.S. which has hiked 13 percent compared to mid -2016.Crude production in U.S has jumped to 9.53 million barrels per day,0.08M bpd shy of the 9.61M bpd record set in June 2015.