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By Michael Poulson, A/S Global Risk Management

In the Mexican Gulf 331 kbpd of crude production has been shut down as well has the onshore production of 300-500 kbpd been shut down. Usually this would be a bullish signal at least for the WTI price as oil pumped in the Gulf of Mexico and in the basins of southern US generally is sold as WTI. But refinery capacity of 2.35 mbpd has been shut down suggesting an excess supply. This is likely the reason for the bearish movement of the WTI price since Friday, leaving a two-year high spread to Brent.

Because of the magnitude of the event in southern US, it could imply increased geopolitical risk premium in the market and potentially influence the Brent price. But that is not what is observed. Brent did not get affected upwards, taking us back to look at the fundamentals of oil supply and demand. The supply/demand situation suggests that there still is a supply glut likely pressuring the prices downwards..

Today the weekly oil stocks data from the American Petroleum Institute (API) is released. Draws in gasoline and distillates stocks are expected as the refinery capacity is reduced due to Harvey.

In Libya, the country has seen further disruptions concluding in two additional fields, El Feel and The Hamda, being shut down. Libya's biggest field Sharara remains shut as well. Again, fundamentals is suggesting enough supply as crude prices do not seem to be much affected for now.

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A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.