Crude Falls As Hurricane Harvey Flooding Shakes U.S. Oil Industry

U.S. crude futures fell in Asian trading on Friday, partly moving back sharp gains from the previous session, amid ongoing turmoil in the oil industry with nearly a quarter of U.S. refining capacity offline.

Crude oil prices posted the steepest monthly loss since March as concerns spread over falling demand in the world's top oil-consuming country after Harvey knocked out almost a quarter of its refineries.

U.S. West Texas Intermediate (WTI) is currently down 40 cents, or 0.9 percent, at $46.81 a barrel. The contract rebounded 2.8 percent on Thursday but is still heading for a weekly decline of 1.9 percent. The contract also ended August down 5.9 percent, marking a fifth monthly decline in six months.

The new Brent contract for November delivery was down 6 cents, or 1 percent, at $52.31 a barrel. The contract for October delivery, which ended trading on Thursday, closed up $1.52, or 2.99 percent, at $52.38 a barrel.

Gasolines Futures

U.S. gasoline futures have rallied more than 28 percent to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the U.S. Labor Day weekend's traditional surge in driving.

Gasoline for September delivery settled up 25.52 cents, or 13.5 percent, at $2.1399 on the last day of trading in the contract. Gasoline for October delivery was down 1.07 percent at $1.7548.

Oil Turmoil

"It looks like everyone thinks that the hurricane will affect refining more than production," said Tony Nunan, oil risk manager at Mitsubishi Corp. "Production will come back faster than refining so it is just going to exacerbate the situation where there's too much oil."

Hurricane Harvey has killed more than 40 people and brought record flooding to the U.S. oil heartland of Texas, paralyzing at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

The U.S. Department of the Interior's Bureau of Safety and Environmental Enforcement said that roughly 13.5 percent of oil production in the Gulf of Mexico was also shut in on Thursday.

The U.S. government tapped its strategic oil reserves for the first time in five years on Thursday, releasing 1 million barrels of crude to a working refinery in Louisiana.

Meanwhile, Motiva Enterprises' Port Arthur, Texas refinery, the nation's largest, may be shut as long as two weeks for assessment of the plant and repair of any damage, sources familiar with plant operations said on Thursday.