Phil Flynn
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Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

[Myra P. Saefong & Sara Sjolin, MarketWatch]

WTI oil rallies for the session, but loses about 6% for the month.

The October contract for WTI crude saw about a slide of 5.9% in August, according to Dow Jones data, while Brent lost 0.5% for the month.

Crude got a boost Thursday with the assumption that “refiners are willing to pay up for crude” amid strong refining margins, said Phil Flynn, senior market analyst at Price Futures Group.

The U.S. Energy Department announced the emergency release of a total of 1 million barrels of oil from the Strategic Petroleum Reserve that will be delivered to a refinery in Louisiana amid an effort to help boost gasoline supplies.

Still, the release gives the impression that refineries are having a hard time finding crude, said Flynn.

The sharp jump for gasoline comes as flooding from devastating weather system Harvey prompted several refineries offline.

“Taking into account reduced runs at a number of Texas and Louisiana refineries, S&P Global Platts estimates 4.1 million [barrels a day] of refinery capacity remains offline as of Wednesday night, nearly half of the U.S. Gulf Coast’s capacity and 22% of U.S. refining capacity,” Nicole Leonard, senior project consultant at S&P Global Platts Consulting, said late Wednesday.

Motiva Enterprises’ Port Arthur, Texas refinery, the nation’s largest, was shut Wednesday. The company said Thursday that it can’t provide any timeline for a restart, raising further concerns over a potential shortage of gasoline supplies.

Oil prices, meanwhile, finished higher for the first time in four sessions. They had been pressured by concerns U.S. refiners will stay shut and demand less oil, potentially leading to higher U.S. stockpiles and rekindling fears of a global supply glut.

“We see a base case of an average of 3 [million barrels a day] of refining capacity offline for the next two weeks. If imports and exports remain affected to the current degree over that time frame…the net result could be a build of up to 15 million barrels” in crude inventories, analysts at Cowen and Company wrote in a note Thursday.

The Colonial Pipeline Company late Wednesday also said it was suspending service to the main pipeline that carries fuel from Texas to the East Coast.

In other energy trading Thursday, natural gas for October NGV17, -0.86%  rose 10.1 cents, or 3.4%, to $3.04 per million British thermal units—for a gain of about 8.8% for the month, Dow Jones data show. Natural-gas prices followed energy peers higher as a weekly EIA report revealed a rise in U.S. supplies of the commodity that generally met with market expectations.

The EIA said supplies of natural gas rose by 30 billion cubic feet for the week ended Aug. 25.

Gasoline futures jumped above $2 a gallon Thursday to levels not seen in more than two years, and oil prices rallied, as flooding due to now-Tropical Depression Harvey continued to disrupt on refineries along the Gulf Coast.

Gasoline for September delivery RBU7, +13.92% which expired at Thursday’s settlement, jumped 25.5 cents, or 13.5%, at $2.140 a gallon. Front-month futures contracts for the fuel haven’t settled at a level that high since June 10, 2015, according to FactSet data. The contract rose 28.1% for the month, according to FactSet data, but WSJ Market Data Group shows a rise of about 25.5%, based on front-month contracts.

The October contract RBV7, -1.96% which is already the most-active contract, became the front-month contract at the day’s settlement. It was up 12.4 cents, or 7.6%, at $1.761 a gallon.

September heating oil HOU7, +5.06% which also expired at the settlement, rose 8.4 cents, or 5%, to $1.758 a gallon, with the contract up about 6.4% for the month, according to Dow Jones data.

Meanwhile, West Texas Intermediate crude oil for October CLV7, -0.21%  rose $1.27, or 2.8%, to settle at $47.23 a barrel on the New York Mercantile Exchange, rebounding after a three-session streak of losses. Brent for the same month LCOV7, +2.85%  added $1.52, or 3%, to $52.38 on ICE Futures Europe.


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