Oil prices rose on Friday as the US petroleum industry prepared for potential output disruptions as Hurricane Harvey headed for the heart of the nation's oil industry in the Gulf of Mexico.
The storm has rapidly intensified since Thursday, spinning into potentially the biggest hurricane to hit the US mainland in 12 years and taking aim between Houston and Corpus Christi on the coast of Texas.
US West Texas Intermediate (WTI) crude futures were at $47.74 a barrel at 0320 GMT, up 31 cents, or 0.7 per cent, from their last settlement.
International Brent crude futures were at $52.39 per barrel, up 35 cents, or 0.7 per cent, from their last close.
Prices rose as production in the affected area shut down in preparation for the hurricane, and on expectations that closures could last if the storm causes extensive damage. “Damage and flooding to refineries and shale fields, disrupted production in the Gulf of Mexico and infrastructure damage are unlikely to be bearish for WTI,” said Jeffrey Halley, Senior Market Analyst at futures brokerage OANDA.
US petrol prices have shot up by almost 10 per cent since Wednesday to $1.73 per gallon, their highest level since April as refiners also shut down in preparation to the storm.
Beyond the storm's potential impact on the oil industry, crude remains in ample supply globally despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to hold back production in order to prop up prices.
OPEC, together with other producers including Russia, has pledged to cut output by around 1.8 million barrels per day (bpd) this year and during the first quarter of 2018. However, not all producers have lived up to their pledges and supplies remain high, resulting in ongoing low prices.
A joint OPEC, non-OPEC monitoring ministerial committee said on Thursday that an extension to the supply-cut pact beyond March was possible, though not yet decided.
Part of the reason for the crude glut has been rising US production, which has jumped by 13 per cent since mid-2016 to 9.53 million bpd, close to its 9.61 million bpd record from June 2015. Because of soaring US output, the discount of WTI crude to Brent on Friday rose to its widest in almost two-years at 4.69 per barrel.
Deeply discounted WTI makes US crude exports attractive, and Thomson Reuters Eikon data shows shipments to Asia hit a record of over 300,000 bpd during the first half of the year.