Crude prices fell to the lowest level in over a month on Tuesday after a hurricane ripped through the heart of the U.S. oil industry, shutting down some 13 percent of refining capacity in the United States.
The refinery closures helped push U.S. gasoline futures to a two-year high of $1.7799 per gallon on Monday, although they had receded to $1.7622 up 2.9 percent, by 2:13 p.m. ET (1813 GMT) on Tuesday.
U.S. West Texas Intermediate (WTI) crude ended Tuesday's session down 13 cents at $46.44 a barrel, its weakest closing price since July 24. International Brent crude futures fell 20 cents lower at $51.69 per barrel and touched a more than one-week low.
The damage assessment could lead to more volatility. Some refineries were preparing for restarts, but heavy rains are expected to last through Wednesday, adding to catastrophic flooding in Houston.
Refineries in Europe and Asia were already gearing up to replace the lost oil products, while the International Energy Agency said it could release emergency oil stocks in the event of extended outages.
Still, Jakob warned that the scale of U.S. upstream outages is not yet clear and extensive damage to oilfields or pipelines could boost WTI prices.
Tropical Storm Harvey, which has been downgraded from a hurricane, hit oil refiners harder than crude producers.
"Around 2-3 million bpd (barrels per day) of refining capacity is offline or in the process of shutting down ... (and) more than 500,000 bpd of oil production... is offline," Barclays bank said.
It added that the storm's impact would "linger for several more weeks."
As a result, the discount of U.S. WTI versus Brent surpassed $5 per barrel, its widest in more than two years.
Crude markets were also looking at disruptions in Libya and Colombia.
In Libya, militia pipeline blockades closed three oilfields and forced state-run National Oil Corp to declare force majeure at several sites. The 280,000-bpd Sharara field, the OPEC member's largest, has been shut for around a week.
In Colombia, a bomb attack by the leftist ELN rebel group halted pumping operations along the country's second-largest oil pipeline, the 210,000-bpd Cano-Limon Covenas.
Despite this, crude remains in ample supply, resulting in low prices.
"We are thus lowering our Brent oil price estimates to $55 per barrel from $60 per barrel in 4Q17 (and) to $57 per barrel from $64 per barrel in 2018," Jefferies bank said.