Oil futures plunged on Monday as traders expected a buildup in crude supplies resulting from the refinery shutdowns in the Gulf of Mexico region due to Hurricane Harvey, according to Bloomberg MarketWatch.
October West Texas Intermediate crude fell $1.30, or 2.7%, to settle at $46.57 a barrel on the New York Mercantile Exchange.
October Brent crude dropped by 52 cents, or 1%, to end trading at $51.89 a barrel on the London ICE Futures Exchange.
Exxon’s Baytown refinery near Houston was shut down due to the storm.
“With many refineries shut in, there is no place for some of the oil coming from unaffected areas like the Permian to go besides storage,” said Brian Youngberg, senior energy analyst at Edward Jones. “While some oil production is down, it is less than the impact on the refineries given the Houston and Corpus Christi areas each have several large refineries.”
Youngberg said the situation “could get worse this week before it gets better, especially if the impact spreads into Louisiana with the storm moving that direction.”
It can take weeks or even months to get new electrical equipment and other parts installed to repair damage from flooding. The hurricane’s path cut right through the heart of the U.S. oil infrastructure, with the Texas coast being home to nearly 30% of the country’s refining capacity.
Investors are anxious to see whether the domestic stockpiles will cushion some of the impact on reduced supplies caused by the weather disruption.