Crude prices fall as USGC refineries expect limited impairments from Hurricane Laura

Singapore — 0248 GMT: Crude oil futures were lower in midmorning trade in Asia on Aug. 28 as they gave up previous gains on a possible supply disruption risk from Hurricane Laura, after most US Gulf Coast refineries and energy infrastructures were spared the brunt of the damage.

At 10:48 am Singapore time (0248 GMT), the ICE October Brent crude futures was down 5 cents/b (0.11%) from the Aug. 27 settle at $45.04/b, while the NYMEX October light sweet crude contract was down 8 cents/b (0.19%) at $42.96/b.

Hurricane Laura, a Category 4 storm, made landfall along the USGC early Aug. 27. Two large refineries operated by Citgo Petroleum and Phillips 66 near Lake Charles, Louisiana, were most directly in the path of the hurricane, S&P Global Platts earlier reported.

"Refineries in Lake Charles seem to have been the worst hit, with reports that Citgo's 418,000 b/d Lake Charles refinery could be shut for 4-6 weeks in order to repair the damage. There is little detail on when Phillips 66's refinery in Lake Charles will restart," ING analysts said in a note Aug. 28.

However, minimal damages are expected for other refineries and energy infrastructures in the area, with most of them shut expected to return once power is restored, according to the US Secretary of Energy Dan Brouillette.

The Gulf of Mexico shut-in production is also expected to return within days as impairments were thought to be better than expected.

"Unless there is any lasting damage to oil production infrastructure, it would not be a surprise to see oil trade down a bit after the storm as damage assessment continues," said Stephen Innes, chief global markets strategist at AxiCorp, in a note Aug. 28.

Elsewhere, rising OPEC+ supply continues to be a key concern on traders' minds, especially as demand recovery appears to be plateauing.

"Brent crude came under pressure from reports that UAE plans to exceed its OPEC+ quota by 900,000 b/d in October. This comes as the rest of the group ramps up supply under the higher quotas. A ceasefire in Libya is also threatening to reignite output from the war-torn country," ANZ analysts said in a note Aug. 28.

OPEC+ production cuts of 7.7 million b/d are expected to run from August to the end of 2020, before tapering into a lower 5.8 million b/d from January 2021. However, members' failures to adhere to production quotas have been a significant concern for the global crude complex.

The 23-country OPEC+ coalition exceeded its quotas by 357,000 b/d from May to July, and members that exceeded their production quotas in May, June and July were expected to cut a combined extra 2.31 million b/d as compensation by the end of September.