(Bloomberg) -- As Hurricane Irma continues to leave destruction in its wake across Florida, Goldman Sachs Group Inc. says Harvey, the storm that struck Texas more than two weeks ago, remains a bigger concern for the oil market.
While Irma, which made landfall in the Keys late Sunday as a Category 4 storm before weakening, will hurt oil demand, Harvey’s damage is far greater, the bank’s analysts including Damien Courvalin said in a Sept. 11 note. That’s because Texas is home to twice the oil consumption per capita of Florida. Together, the storms will impact about 600,000 barrels a day in demand, according to the bank.
“We believe that Irma will have a negative impact on oil demand but not on oil
production or processing,” the analysts said. “Harvey’s negative impact on demand will remain larger, however, given the large concentration of energy-intensive petrochemical activity in its path.”
Crude prices in New York slumped as gasoline prices soared after Hurricane Harvey halted almost a quarter of the nation’s refining capacity. While some oil processing has recovered, 6 percent of U.S. capacity still remains shut. The post-storm recovery will likely bring oil demand to a higher level, gradually offsetting the negative impact, Goldman Sachs said.
Irma’s hit in demand will partly offset the Gulf Coast’s refinery runs, which is taking longer than expected to recover, according to the bank. Still, on a net basis, U.S. crude inventory builds could grow to record levels with smaller production draws in the coming week, Goldman Sachs said.
“The recovery is well underway but the restarts are taking more time and, for some refiners, exposed more significant damage,” the analysts said.
Irma, which initially hit the Keys in Florida with winds hitting 130 miles per hour (209 kilometers), has knocked out power to at least 4.7 million people, paralyzed tanker traffic and shut about 6,000 gasoline stations. It has now weakened to a Category 1 storm, and was about 25 miles northeast of Tampa, the National Hurricane Center said. Harvey slashed refining capacity across Texas, forcing shutdowns of key refineries from Corpus Christi and Houston to Port Arthur, including the largest U.S. fuel-making plant.
Goldman Sachs’s estimate for refinery outages remains at 2.24 million barrels a day following Harvey. The lack of an outlet for U.S. crude production may additionally create a risk of onshore production disruptions as outages remain elevated following Harvey, the bank said.
West Texas Intermediate for October delivery was at $47.66 a barrel on the New York Mercantile Exchange, up 18 cents, at 4:30 p.m. in Singapore. Prices slid $1.61 to close at $47.48 on Friday, the most since July 5. Gasoline futures, which surged 25 percent last month, lost 0.5 percent.