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UPDATE 6-Oil rises slightly as U.S. producers, refiners avoid worst of storm

Fri, 28th Aug 2020 03:29

* WTI, Brent on track head for weekly gains

* Port of Houston set to reopen

* Refiners assess plants after storm passes

* Long-term demand outlook remains bearish
(Updates prices, context)

By Julia Payne

LONDON, Aug 28 (Reuters) - Oil prices rose slightly on
Friday as storm Laura passed the heart of the U.S. oil industry
in Louisiana and Texas without causing any widespread damage to
refineries.

Brent crude futures for October, set to expire on
Friday, were up 10 cents to $45.19 a barrel by 1318 GMT.

U.S. West Texas Intermediate (WTI) crude futures rose
20 cents to $43.24 a barrel.

"With the U.S. Gulf hurricanes out of the way and
preliminary assessment showing no damage to the upstream or
downstream facilities, crude has surrendered most of the storm
premium and could enter a holding pattern again," said Vandana
Hari, oil market analyst at Vanda Insights.

Indeed the market has been stuck in an unusually long spell
of low volatility, analyst Eugen Weinberg at Commerzbank said,
in contrast with stock markets.

"It didn't even react to a weaker dollar. There's no impulse
in either direction. It has seldom had so little volatility for
such a long period, especially given the dynamic situation on
the demand and supply sides," Weinberg said.

Hurricane Laura, since downgraded to a tropical depression,
hit Louisiana early on Thursday with winds of 150 miles per hour
(240 km per hour). Buildings were damaged, trees fell and power
was cut to more than 650,000 people in Louisiana and Texas, but
refineries were spared from feared massive flooding.

Valero Energy Corp began restarting its 335,000
barrel-per-day (bpd) Port Arthur, Texas, refinery on Friday,
while Exxon Mobil was preparing to restart its 370,000
bpd Beaumont, Texas, refinery.

U.S. producers had shut 1.56 million bpd of crude output, or
83% of the Gulf of Mexico's production, while nine refineries
had shut around 2.9 million bpd of capacity, or 15% of U.S.
processing capacity, ahead of the storm.

Late on Thursday, the Port of Houston, the top U.S. crude
oil export hub accounting for about 600,000 bpd of shipments,
was in the process of reopening to commercial shipping.

Further ahead, demand expectations continue to be bearish.
The contango between Brent crude for nearby delivery and
six-months ahead remained near its widest since late May at more
than $2. <LCOc1-LCOc7>

"Aside from Saudi Arabia, everyone else is clear that global
oil demand won’t return to 2019 (levels) until at least 2022.
The latest monthly estimate from the IEA/EIA/OPEC triumvirate
suggests consumption will not recover to pre-pandemic levels
next year," PVM Oil Associates said in a daily note.
(Reporting by Sonali Paul in Melbourne and Roslan Khasawneh in
Singapore; editing by Kirsten Donovan/Jason Neely/Susan Fenton)

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