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Oil prices increase as Texas refineries start returning to normal

Oil prices increase as Texas refineries start returning to normal

The US has the world's largest refining capacity and just under half of it is concentrated in Texas and Louisiana (nearly 30 percent in Texas alone). Enterprise Products Partners said it restarted lines Monday; Colonial Pipeline Co said it planned to restart the gasoline line between Houston and Hebert, Texas on Tuesday. Gasoline for October RBV7, -1.14% fell 1.4% to $1.68 a gallon on Wednesday. The two pipelines transport around 675,000 barrels per day (bpd) of West Texas crude oil into East Houston.

Refineries are quickly returning to production and only about 11 percent of all US refining capacity remained closed on Monday, Commerzbank said in a report.

Meanwhile, another hurricane is developing in the South Atlantic that could have an impact on gasoline demand. Futures traders anxious that the approaching Hurricane Irma could disrupt demand while supply recovered as most refineries returned to service. Both areas saw devastating flooding.

However, as crude oil inventories continue to build up on ships stuck in the Gulf of Mexico with nowhere to offload their cargo, it may take a while before the oil industry gets back to normal.

The upswing in crude prices marked a swift reversal from last week, when prices had languished in the wake of Hurricane Harvey. While demand in PADD III could be affected in the long-term, we expect the most severe impact to be fairly transient.

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"The price decreases before were probably considered overdone by market participants", Eugen Weinberg, head of commodities research at Commerzbank, said of the quicker-than-expected recovery at refineries and other oil infrastructure damaged by Harvey. The NHC issued warnings for the USA and British Virgin Islands, Puerto Rico, Vieques and Culebra, while Florida declared a state of emergency to prepare for a potential strike by Irma.

If the US refining situation does not fully recover soon, the price of WTI crude oil could continue to fall.

The American Petroleum Institute (API) is due to release its weekly oil data later on today.

The number of U.S. Gulf oil and gas production platforms with evacuated personnel dropped to 14 from 30, a government agency said.

If anyone needed further evidence of how America's energy picture has improved over the past decade, hurricane Harvey provided it. "I think WTI is going to stay weak for a while". Support, apart from the technical buying triggered by the break higher, has come from doubts over United States debt ceiling and tax reforms as well as continued geopolitical tensions. A move under $48.05 will signal the return of sellers. A break below this level will indicate that the buying is slowing.

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