Sept. 26 (UPI) — Following massive gains in the previous session, crude oil prices gave up some ground in Tuesday trading, though markets still look tight.
The price for Brent crude oil surged almost 4 percent in Monday trading amid concerns about the potential market shock from a vote for independence from the Kurdish north of Iraq. About a half million barrels of oil per day moves from a pipeline in the Kurdish region to a Turkish sea port and a frustrated Ankara reminded the Kurdish government that it was the one that controlled the tap.
A geopolitical risk premium from escalating tensions between the United States and North Korea was added midway through the session after Pyongyang said it viewed some of the messages from U.S. President Donald Trump’s account on Twitter as a declaration of war.
The U.S. energy sector, meanwhile, continues to recover from the impacts of Hurricanes Harvey and Irma. One refinery in the Gulf Coast region is still out of service nearly a month after Harvey made landfall, but most market indicators suggest the situation is returning to normal.
Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in an emailed market report the bullish sentiment that followed the storms won’t last for long.
“Oil demand will surge because of the rebuilding effort that will take place,” he said. “Rebuilding entire cities will use oil and oil products like crazy and the demand destruction will be replaced with a rebuilding surge.”
Puerto Rico was devastated by the impact of Irma and Hurricane Maria, which hit the U.S. island territory as a Category 4 storm.
The price for Brent crude oil was down 1.4 percent as of 9:06 a.m. EDT to $58.16 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.77 percent to $51.82 per barrel.
Traders will be waiting for after the market closes Tuesday to survey data from the American Petroleum Institute on supply levels in the United States. Emerging sentiment about balance, following years of oversupply, has been supportive of crude oil prices during recent sessions.
Commodity pricing group S&P Global Platts shows an expected build in crude oil inventories of 1.3 million barrels reported by the U.S. Energy Information Administration later this week and a draw on gasoline stocks of 100,000 barrels.
Geoffrey Craig, an oil futures editor at Platts, said in an emailed report the market situation is still anything but normal. Crude oil stocks usually grow this time of year because refineries shut down for seasonal maintenance.
“But the force of Harvey upended the global oil market, creating financial incentives for refiners to ramp up production instead of shutting down,” he said.
For producers, Chesapeake Energy said Tuesday it revised its guidance because of the impact from Harvey. Strains should last through the third quarter, the company said.