Oil and gasoline prices snapped back to levels seen before Hurricane Harvey disrupted about a quarter of U.S. refining capacity, but another incoming storm could cut fuel demand and weigh on prices, analysts said on Tuesday.
U.S. West Texas Intermediate crude jumped 2.9 percent, or $1.37, to close at a three-week high of $48.66 as refineries sidelined by Harvey started processing oil into fuels. WTI touched a seven-week closing low of $45.96 last Wednesday.
U.S. gasoline futures for October delivery were down 2.8 percent to $1.6989 per gallon shortly before WTI's settlement. The September contract rose as high as $2.17 a gallon last week.
WTI prices. Source: FactSet
"What we're seeing here today is really a reversal of the activity we saw in the previous week as oil pipelines were shut down and refineries were shut down," said Andy Lipow, president of Lipow Oil Associates.
About 3 million barrels a day, or 16 percent of U.S. refining capacity, remained offline or in preliminary restart mode on Monday evening, according to Lipow. That cut about 1.2 million gallons per day of gasoline supply, roughly equal to consumption in California, Oregon and Washington combined.
Refineries were mostly up and running in Corpus Christi, Texas, where Harvey made landfall as a Category 4 hurricane. Plants in Lake Charles, Louisiana, near Harvey's second landfall last week, were also churning out fuel after briefly reducing activity.
Major pipelines that move fuel from Houston to Dallas, St. Louis, Tulsa and Chicago were back in operation. The critical Colonial Pipeline that runs from Houston through the Southeast and up to New Jersey fixed a partial outage on its diesel line and expected its gasoline line to be running on Tuesday.
But outages lingered at five facilities in the hard-hit Houston area, as well as at four plants just southeast in the Port Arthur-Beaumont, Texas, refining hub. Both areas saw devastating flooding.