Oil prices, on Thursday, August 31, appreciated by 1 percent, recovering from losses made a day earlier, but U.S. crude is on track for the steepest monthly losses in more than a year on demand concerns after floods knocked out a quarter of U.S. refining capacity.
International benchmark Brent crude LCOc1 was up 58 cents, or 1.1 percent, at $51.44 a barrel. It had fallen more than 2 percent in the previous session.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were set to close the month down 7 percent, their steepest monthly loss since July 2016. They were trading 1.4 percent up at $46.58 a barrel at 1352 GMT.
Prices also rallied in the oil products markets, with U.S. gasoline futures RBc1 hitting a two-year high above $2 a gallon, buoyed by fears of a fuel shortage just days ahead of the Labor Day weekend that typically brings a surge in driving.
Hurricane Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralyzed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.
The shutdowns also led the U.S. government to tap its strategic oil reserves for the first time in five years on Thursday, releasing 500,000 barrels of crude to a working refinery in Louisiana.
“The current steep recovery follows yesterday’s steep drop. The sell-off was bigger than expected and we see some bargain hunting now,” said Hans van Cleef, senior energy economist at ABN Amro.
Analysts at Goldman Sachs and Stifel said they expected U.S. infrastructure outages to last several months but said it was difficult to estimate the exact damage.
Others saw potential for operational refineries to delay typical September seasonal maintenance to benefit from high prices.
U.S. crude and product stocks, typically watched closely by oil investors because they reflect market balancing, were largely ignored this week.
U.S. commercial crude stocks fell by 5.39 million barrels last week to 457.77 million barrels, the U.S. Energy Information Administration said on Wednesday.
That’s down 14.5 percent from record levels reached in March.
At the same time, the amount of crude entered into refineries reached a record high of 17.73 million bpd, the data showed. The number is expected to have dropped dramatically this week because of infrastructure closures.
Analysts at JBC Energy said that figure could slip to as low as 15-16 million bpd.
Others said the refinery closures would lead to a rise in crude inventories.