Oil prices are tumbling on Thursday, despite the fact that Tropical Storm Harvey is “rapidly strengthening” in the Gulf of Mexico. If it turns into a hurricane, it will be the first to hit Texas since 2008. To prepare for the storm, producers in the region have been shutting down their oil rigs.
West Texas Intermediate crude oil, the US benchmark, was down by 2.63% at $47.10 per barrel at 12:51 a.m. ET.
Oil prices, generally speaking, jump after production is shut offline. But, it appears that investors have directed their attention more towards US oil production than towards supply disruptions from the shutting down of the rigs.
On Wednesday, the latest data from the Energy Information Administration showed that although crude stockpiles were lower for the eighth consecutive week, production was at the highest level since July 2015.
“A sharp fall in crude oil stocks over the last month has provided further evidence that the market is finally rebalancing and has boosted prices,” said Capital Economics’ Thomas Pugh said. “However, a jump in supply since May means that stocks are now unlikely to fall by as much as we had previously anticipated. Whilst we had always expected strong growth in US output, US shale firms have managed to ramp up production by even more than we had expected, adding about 1 million bpd since late 2016.”
Production in Nigeria and Libya, moreover, has climbed by about 0.5 million barrels per day, according to data cited by Capital Economics analysts. That figure alone offsets nearly one-third of the supply cuts by the rest of the cartel and other cooperating producers.
As for Harvey, a couple of companies have already taken workers and production offline ahead of the storm.
According to Bloomberg, the Royal Dutch Shell Plc closed production at its Perdido platform in the Gulf of Mexico and evacuated the facility, and Anadarko Petroleum Corp. shut production and evacuated people at several of its platforms.
But it appears the storm won’t travel over the region with a higher concentration of oil and gas rigs, according to the National Oceanic and Atmospheric Administration’s graphic of the latest projected path of Harvey’s storm center. (The chart doesn’t show the size of the storm.)
And below, the following NOAA map shows the roughly 4,000 active oil and gas platforms in the northern Gulf of Mexico.