WTI edges higher but products dip as US Gulf braces for Laura

New York — US crude prices edged higher Aug. 26 as a strengthened Hurricane Laura approached the heart of US energy country, but the rest of the energy complex declined amid weakened demand outlooks.

NYMEX October WTI settled 4 cents higher at $43.39/b while ICE October Brent was down 22 cents on the day at $45.64/b.

As of midday Aug. 26, US Gulf upstream operators had shut in about 1.559 million barrels of oil from platforms in the region, or about 84% of the region's crude production, the US Bureau of Safety and Environmental Enforcement said in its daily update.

The figures are unchanged from a day earlier, indicating that companies have taken all facilities offline along the predicted path of Hurricane Laura, which is forecast to strengthen to major hurricane status as it approaches the Texas-Louisiana border early on Aug. 27, according to the US National Hurricane Center.

Seven major refinery closures from Lake Charles to Houston have taken about 2.34 million b/d in oil refining capacity offline, including the nation's largest refinery, Motiva's Port Arthur Refinery.

But refined product futures settled lower as an eastward shift in the storm track appeared to lessen the risks to Houston-area energy infrastructure.

NYMEX September RBOB settled down 3.53 cents at $1.3606/gal and September ULSD settled 1.54 cents lower at $1.2447/gal.

ExxonMobil was prepared to shutter its massive Baytown refining and petrochemical complexes nearer to Houston, but the company ultimately decided to keep Baytown up and running for now with Laura's strongest winds forecast to hit southwestern Louisiana. The same applies to ExxonMobil's Baton Rouge Refinery farther east in Louisiana.

With the hurricane hours away from landfall, market focus has shifted toward post-storm demand destruction, analysts said, adding further pressure to gasoline and diesel pricing.

The backwardation in front-to-second month RBOB futures narrowed to 9.72 cents/gal Aug. 26, in from a one-year high 12.74 cents/gal on Aug. 25.

RBOB futures had moved as low as $1.3264/gal in early US trading, but prices rallied after US Energy Information Administration showed nationwide gasoline inventories declined 4.58 million barrels to 239.8 million barrels in the week ended Aug. 21. Notably a 4.44 million-barrels draw on the US Atlantic Coast comprised the bulk of the nationwide inventory decline, and put regional stocks 0.5% behind the five-year average - eliminating a surplus of as much as 28% in late June.

(Corrects month for NYMEX WTI to October in second sentence)