Crude prices mixed as US braces for possible supply disruption from Hurricane Laura

Singapore — 0228 GMT: Crude oil futures were mixed in midmorning trade in Asia on Aug. 26 as US Gulf Coast refineries closed ahead of Hurricane Laura while American Petroleum Institute data, released late Aug. 25, showed a larger-than-expected drawdown in US commercial crude and gasoline inventories.

At 10:28 am Singapore time (0228 GMT), the ICE October Brent crude futures was up 11 cents/b (0.24%) from the Aug. 25 settle at $45.97/b, while the front-month NYMEX October light sweet crude contract was down 4 cents/b (0.09%) at $43.31/b.

"Crude oil prices gained, dragged higher by surging gasoline futures as Hurricane Laura heads towards the US Gulf Coast. The storm is expected to make landfall on Thursday [Aug. 27] as a category three hurricane," ANZ analysts said in a note Aug. 26.

The back-to-back tropical storms Marco and Laura has seen upstream operators shut about 1.558 million b/d of oil, or 84.3% of offshore production, by Aug. 25, according to latest data from the US Bureau of Safety and Environmental Enforcement.

Oil refineries, such as Motiva's more than 600,000 b/d refinery and chemical operations in Port Arthur, Texas, ExxonMobil's 366,000 b/d in neighboring Beaumont, and Valero's 335,000 b/d Port Arthur Refinery will also be closed, S&P Global Platts reported earlier.

In total, approximately 1.8 million b/d in US oil refining capacity, or nearly 18% of total US Gulf Coast refinery capacity, is expected to come offline.

Meanwhile, a private inventory report by the American Petroleum Institute showed a larger-than-expected drawdown in both US commercial crude supplies and gasoline inventories.

"The latest numbers from the API show that US crude oil inventories fell by 4.52 million barrels over the last week, which is more than the 2.5 million barrels drawdown the market expected. Looking at products, gasoline inventories fell by a massive 6.39 million barrels, much more than the 1.75 million barrels draw the market was expecting and seems to have provided some support to the RBOB," ING analysts said in a note on Aug 26.

At 10:31 am (0231 GMT), the NYMEX September RBOB futures contract stood at $1.3790/gal, down 1.28% from $1.3969/gal at the Aug. 25 settle -- the highest front-month settle since March 5.

However, any price rally in the global crude complex continues to be capped by rising COVID-19 cases worldwide and the resulting demand uncertainty and oversupply.

The global COVID-19 case count stood at 23,813,181, while daily infections remained high at 226,905 cases for Aug. 24, latest data from Johns Hopkins University showed.

"The key to near term price movements will be the extent of any damage caused by the hurricanes and then bolstered by the support from broader risk markets once the hurricane price pressure eases, as it always does," said Stephen Innes, chief global markets strategist at AxiCorp, in a note Aug. 26.

Market participants will look to fresh cues from a more definitive inventory report by the US Energy Information Administration, due later Aug. 26.