×

UPDATE 8-Oil flat as some U.S. refineries restart in Harvey's wake

* Some U.S. oil refineries shut by Harvey are restarting

* U.S. government releases 1 mln barrels of crude from reserves

* Gasoline futures fall 5 pct as shortage fears ease (Updates throughout, changes dateline previous LONDON)

NEW YORK, Sept 1 (Reuters) - Oil prices recouped some losses from earlier in the day on Friday to trade relatively flat as some refineries shut by Hurricane Harvey along the U.S. Gulf Coast began to restart, calming fears over fuel shortages.

Harvey, downgraded to a tropical storm and losing steam as it moved inland, killed more than 40 people and brought record flooding that shut at least 4.4 million barrels per day (bpd) of refining capacity, roughly a quarter of the U.S. industry.

That sparked fears of a fuel shortage before the Labor Day weekend and cast doubts on refinery demand for crude, widening the spread between U.S. gasoline and crude oil.

U.S. gasoline prices hit a two-year high above $2 a gallon on Thursday, but on Friday, as two refineries began to restart, the "crack spread" <RBc1-CLc1> fell nearly 11 percent, while gasoline futures fell 5 percent.

Brent crude for November was 2 cents higher at $52.88 a barrel by 11:02 EDT (1502 GMT). The Brent contract for October, which expired on Thursday, closed up $1.52 at $52.38.

U.S. crude was last 1 cent higher at $47.24 a barrel. The contract rebounded 2.8 percent on Thursday but is heading for a weekly decline of roughly 1.5 percent.

"The good news for consumers is that it seems some of the units are in the process of getting back in operation," said John Kilduff, partner at energy hedge fund Again Capital LLC, adding the news was underpinning crude prices. "You can see the light at the end of the tunnel."

Marathon Petroleum Corp's Galveston Bay Refinery in Texas City, Texas, had raised production to 45 percent of its 459,000 barrel per day capacity, sources told Reuters on Friday, while Citgo Petroleum Corp on Friday said it was beginning to restart its 157,500-barrel-per-day (bpd) refinery in Corpus Christi, Texas.

The U.S. government tapped its strategic oil reserves for the first time in five years, releasing 1 million barrels of crude to a working refinery in Louisiana. An adviser to President Donald Trump told a White House briefing more oil could be released from reserves.

"We would be very comfortable tapping into that," homeland security adviser Tom Bossert told reporters.

U.S. crude oil stocks fell sharply last week as refineries raised output with the approach of Harvey, the Energy Information Administration said.

The oil market outside the United States remains well supplied with ample production by the Organization of the Petroleum Exporting Countries. However, OPEC oil output slipped in August by 170,000 bpd from a 2017 high, a Reuters survey found.

(Additional reporting by Christopher Johnson in London and Aaron Sheldrick in Tokyo; Editing by Dale Hudson, Adrian Croft, Greg Mahlich)