LONDON – U.S. crude oil prices edged up on Tuesday as a tropical storm headed towards the oil-producing state of Texas, but oversupply kept Brent lower.
U.S. crude was up 23 cents at $59.75 a barrel at 1354 GMT, staying within a range of $57-$62 per barrel that has been in place since the beginning of May.
Brent was down 6 cents at $63.89 per barrel.
Tropical Storm Bill is hurtling towards the Texas coast from the Gulf of Mexico, threatening heavy rains and strong winds, with flash-flood warnings in effect for central Texas and the Houston area.
Output from oil platforms in the U.S. Gulf, which pumps about a fifth of all U.S. crude, has not been affected, and the focus is now switching to refineries as the storm makes landfall. More than 45 percent of U.S. refining capacity is located along the Gulf Coast.
“Any reduction in crude oil processing as a result of the tropical storm should really lead to lower oil prices because it means that crude oil stocks increase,” Carsten Fritsch, an oil analyst at Commerzbank, said.
“On the other hand, it would drive up the prices of oil products as the lower production would result in destocking.”
U.S. crude is also outperforming Brent on the expectation that Wednesday’s U.S. inventory data will show another draw.
U.S. crude stocks are forecast to have fallen 1.8 million barrels week-on-week, according to a Reuters poll of analysts, the seventh weekly draw in a row. The data from the Energy Information Administration is due on Wednesday.
“That has been the main source of support, because OPEC is still over-supplying,” said Ole Hansen, senior commodity strategist at Saxo Bank.
Unsold North Sea and West African crude barrels are building up in tankers offshore in the Atlantic Basin, weighing on physical crude prices. This is despite the fact that European refiners are running hard to take advantage of strong margins.
“The amount of crude oil afloat on the water off the coast of the UK is increasing and that is putting considerable pressure on the North Sea price structure,” Olivier Jakob, an oil analyst at Petromatrix, said in a note.
“The last time we had a North Sea structure as weak was in July of last year, a move that preceded the big flat price dump,” he warned.
(Additional reporting by Henning Gloystein in Singapore and Osamu Tsukimori in Tokyo; Editing by Dale Hudson)
This article was from Reuters and was legally licensed through the NewsCred publisher network.