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Oil Futures Slide on Tropical Depression Harvey Concerns

August 24, 2017 at 17:35 by Andrew Moran

Oil prices are tumbling on Thursday as investors hit the caution button over worries on the impact of Tropical Depression Harvey. The weather event, which is expected to morph into a hurricane upon landfall, is heading towards oil producing facilities in the Gulf of Mexico. Texas has already declared a State of Disaster ahead of the heavy rainfall.

September West Texas Intermediate (WTI) futures slipped $1.24, or 2.56%, to $47.17 per barrel at 17:15 GMT on Thursday on the New York Mercantile Exchange.

Brent, the international benchmark for oil prices, is also sliding towards the end of the trading week. October Brent crude futures dipped $0.86, or 1.64%, to $51.71 a barrel on London’s ICE Futures exchange.

Investors were engaged in a massive sell-off ahead of Harvey, which has strengthened to 80 mph winds and is expected to slam into the Lone Star State early Friday. Texas Governor Gregg Abbott declared a State of Disaster for 30 counties, including Austin, Fayette, Galveston, Jackson, and Victoria. Many areas could experience flash flooding, strong winds and even tornadoes, and Houston could bear the brunt of the storm.

This is the first hurricane to hit Texas since 2008, when Hurricane Ike killed 200 people and caused billions of dollars worth of damage.

Traders are paying close attention because the storm is heading in the direction of the region’s oil activities. Shell, ExxonMobil and Anadarko Petroleum have already confirmed they are reducing production and personnel levels in the Gulf of Mexico.

What makes the trading patterns interesting for analysts on Thursday is the so-called crack spread buying. Traders are selling crude oil and buying refined products like gasoline.

Oil prices have been trading between $45 and $50 for much of August. US crude futures surged higher on Wednesday when the US Energy Information Administration (EIA) reported that domestic crude stockpiles fell by 3.3 million barrels last week. But, according to the EIA, total US crude output jumped by 26,000 barrels per day (bpd) to 9.528 million bpd, the highest production level since July 2015.

Crude oil was not affected by the US dollar as the greenback remained relatively flat.

If you have any questions and comments on the commodities today, use the form below to reply.

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