Investing.com – Crude futures settled lower on Thursday, as Tropical Storm Harvey looks set to hit the refinery hub of the U.S., stoking fears of an uptick in crude supplies as refineries are expected to shut down operations.
On the New York Mercantile Exchange crude futures for October delivery fell 2% to settle at $47.43 a barrel, while on London's Intercontinental Exchange, Brent slid 1% to trade at $52.05 a barrel.
Sentiment on oil futures soured, as traders anticipated a rise in supplies of crude oil, the primary input at refineries amid expectations of refinery outages along the U.S. Gulf Coast, after the U.S. National Hurricane Center forecasted Harvey was expected to be a major hurricane when it approaches the middle Texas coast on Friday.
“Demand numbers might suffer, and some [crude-oil] inventories might increase while refinery production also dips.” said Richard Hastings, macro strategist at Seaport Global Securities.
Two refineries in Corpus Christi, Texas - Flint Hills Resources' 296,470 barrels per day plant and Citgo Petroleum's 157,000 bpd plant - were shutting down operations in preparation of the storm.
More than 45% of the nation’s petroleum refining capacity is located along the Gulf Coast, as well as 51% of U.S. natural-gas, processing plant capacity, according to the EIA.
The slump in crude oil prices comes a day after the Energy Information Agency (EIA) released a report showing that supplies of crude fell for an eighth straight week.
Inventories of U.S. crude fell by roughly 3.3m barrels in the week ended Aug 18, missing expectations of a draw of about 3.5m barrels.
The trend of falling crude supplies, however, comes against the backdrop of the rising U.S. crude output to a more than two-year high.
The EIA reported that total domestic crude production rose 26,000 barrels per day (bpd) to 9.528m bpd last week, holding at levels not seen since July 2015.