Goldman Sachs on Irma: Negative for oil demand but not on oil production, processing
An overnight note from Goldman Sachs on oil impacts from US Hurricane's Harvey and Irma
- We believe that Irma will have a negative impact on oil demand but not on oil production or processing.
- Harvey's negative impact on demand will remain larger, however, given the large concentration of energy-intensive petrochemical activity in its path.
- Given the only modest impact Harvey had on oil production, the combined demand loss generated by these two hurricanes will be a bearish shock for global oil balances in September of c.600 kb/d.
- Over the next several months, we believe that the post-storm recovery will likely bring oil demand to a higher level, helping to gradually offset this negative initial impact.
- The lack of an outlet for US crude production should post-Harvey refinery outages remain elevated could in addition over time create risk of onshore production disruptions.
- Finally, the EIA weekly Petroleum Status Report for the week ending September 1 came close to our expectations for Harvey's impact. Our updated estimates show, however, that the recovery in refinery runs and trade flows since is taking longer than we had previously expected. The Irma demand hit will help partly offset this slower USGC refining recovery. Net, we project a larger - in fact record large - crude inventory build but smaller product draws in the coming week than previously.
That last point is something to watch in the inventory figures due Tuesday and Wednesday from the US