CNBC/3 September 2017
Benchmark global oil prices fell on Monday after a powerful North Korean nuclear test triggered a shift away from crude markets to assets perceived to be safer, such as gold.
Brent crude futures, the international benchmark for oil prices, were down 68 cents, or 1.3 percent, at $52.07 a barrel by 0808 GMT.
U.S. West Texas Intermediate (WTI) crude futures were more stable, down 8 cents at $47.21 barrel, as several refineries in the U.S. Gulf Coast restarted 10 days after Hurricane Harvey struck the region, boosting the outlook for demand in the world’s top oil consumer.
Traders were nervously eyeing developments in North Korea, where the military conducted its sixth and most powerful nuclear test over the weekend.
Pyongyang said it had tested an advanced hydrogen bomb for a long-range missile, prompting the threat of a “massive” military response from the United States if it or its allies were threatened.
That put downward pressure on crude as traders moved money out of oil – seen as high-risk markets – into gold futures, traditionally viewed as a safe haven for investors. Spot gold prices rose for a third day, gaining 0.9 percent on Monday.
Overall trading activity in oil futures market is expected to be low on Monday due to the U.S. Labor Day public holiday.
Benchmark U.S. gasoline futures fell around 3.5 percent amid signs that the damage from Hurricane Harvey to the Gulf Coast energy infrastructure was not as bad as initially feared.
A number of major refineries, which convert crude oil into refined products such as gasoline and jet fuel, as well as distribution pipelines were gradually resuming operations.
“The disruptions from Hurricane Harvey in the U.S. Gulf Coast are gradually clearing. In the broader scheme of things, it appears that so far the energy industry was spared major damages to assets and infrastructure,” analysts at Vienna-based JBC Energy said in a note.
“However, some Houston area refineries will likely remain offline for some time longer.”
Still, about 5.5 percent of the U.S. Gulf of Mexico’s oil production, or 96,000 barrels of daily output, remained shut on Sunday, the Federal Bureau of Safety and Environmental Enforcement said.
Texas Governor Greg Abbott estimated damage at $150 billion to $180 billion, calling it more costly than Hurricanes Katrina or Sandy, which hit New Orleans in 2005 and New York in 2012.
Storm Harvey made landfall along the Gulf coast of Texas and Louisiana last week, knocking out almost a quarter of the entire U.S. refining capacity, causing a price spike and supply gap for fuels like gasoline, which traders around the world have been scrambling to fill.
News Source: CNBC