Oil prices dip on refinery shutdown

Oil prices soften as market assesses hurricane damage

Brent crude is now at $52.35 a barrel - up 0.42%, while WTI is at $46.63 - up a tad- 0.13%.

Crude prices slipped lower on Tuesday as the market grappled with the shutdown of 13 percent of refining capacity in the United States after a hurricane ripped through the heart of the country's oil industry. On Tuesday, US gasoline futures jumped four percent.

"As of August 29, we estimate USA refining production offline was 4.1 million barrels per day (bpd); this represents 23 percent of total USA refining production", Goldman Sachs said in a note to clients.

About 26 percent of Gulf natural gas production is offline, or about 828 million cubic feet (23.4 million cubic meters) per day, BSEE said.

The largest refinery in the U.S., Motiva Enterprises (Port Arthur), owned by the national oil company of Saudi Arabia, now operates at only 40 percent of its capacity (refining at 100 percent capacity is 605,000 barrels per day).

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In early afternoon Asian trade, U.S. benchmark West Texas Intermediate was down 14 cents at $46.30 while Brent crude for October eased 21 cents to $51.79.

At the same time, U.S. gasoline prices spiked to their highest level since the middle of 2015 after the storm knocked out almost a quarter of USA refineries.

Brent for October delivery is down 0.077% and WTI futures for the same month are down 0.151% at $46.50 a barrel. Motiva has already been reducing production at the 603,000 barrel per day (bpd) Port Arthur, Texas, refinery as flood waters continued to inundate the area. But MRs may get more work in Europe to bring gasoline cargoes to the US. Some refineries were preparing for restarts, but heavy rains are expected to last through Wednesday, adding to catastrophic flooding in Houston.

Oil investors are bracing themselves for a turbulent week as Hurricane Harvey continues to tear through Texas - the core of the USA oil industry.

"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.

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