In the wake of the hurricanes Harvey and Irma, oil demand is expected to drop by some 900,000 bpd this month, Goldman Sachs said on Monday. A separate report showed that US oil production dropped sharply to 8.78 million barrels per day due to hurricane effect.
West Texas Intermediate crude for October delivery rose 59 cents to settle Monday at $48.07 barrel on the New York Mercantile Exchange.
"Harvey, as a result, had a significant negative impact on refineries and ethylene crackers utilization and their crude and [natural-gas liquids] feedstock demand", the analysts said.
Oil prices rose on Monday as key USA refineries began restarts following Hurricane Harvey, which may help revive crude oil processing, while fuel prices fell as Hurricane Irma is likely to clip demand for gasoline and diesel.
"Irma will have a negative impact on oil demand but not on oil production or processing", Goldman analysts said in a note, as carried by Reuters. Benchmark Brent crude has lost 6 per cent this year and was trading at $53.81 a barrel at 11.10am UAE time on Tuesday. That is "because Texas has twice the oil consumption per capita of Florida given the significant concentration of refining and petrochemical capacity on the U.S. Gulf Coast", they said.
Despite the agreement, the oil price (WTI) has suffered a major selloff on the day of the agreement extension and was down around 3 percent by the end of the day.
Saudi Arabian Energy Minister Khalid al-Falih discussed with his Venezuelan and Kazakh counterparts the possible extension of the global oil supply cut pact beyond March 2018, the Saudi energy ministry said on Sunday. Analysts at consultancy JBC Energy said those talks should prove supportive for crude prices. The goal of the deal, which was extended in May, was to drain a global oversupply that has kept prices depressed amid a resurgence in US shale production.
The week will also see key monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency to assess global oil supply and demand levels. The increasing numbers of operating rigs, as well as increasing production, have been raising concerns that the US shale oil producers which were able to cut their production cost dramatically over the past years are now a low-priced global competitor and would continue to undermine the OPEC agreement to cut supplies.
Elsewhere, declined 0.4 cents, or 0.3%, to $1.632 a gallon, while added 1.2 cents, or 0.4%, to $2.962 per million British thermal units.