Oil Market Instability Following Hurricane Harvey and North Korea's Nuclear Test

Global oil markets faced instability on Monday, September 4, following production halts in some areas of the U.S. due to Hurricane Harvey, which forced refineries along the Gulf Coast to shut down and reduced demand. At the same time, North Korea's nuclear test also impacted oil prices. According to Reuters, Hurricane Harvey halted nearly a quarter of the total refining capacity in the U.S., particularly in Texas, leading to a sharp increase in crude oil prices and disorder in gasoline supply. This incident also complicated oil production in the U.S. and limited demand for crude oil from refining industries, resulting in market instability. West Texas Intermediate crude rose by 13 cents to $47.42 per barrel, while Brent crude fell by half a percent, equivalent to 27 cents, selling at $52.48 per barrel. Meanwhile, global markets are watching developments in North Korea, which conducted its sixth and most powerful nuclear test over the weekend. The North Korean government claims it tested a hydrogen bomb designed to be placed on an intercontinental missile in response to military threats from the U.S. and its allies. This situation exerted pressure on the crude oil market, prompting traders to pull their money from the high-risk oil market and move towards gold trading, traditionally considered a safe haven for investors. On Monday, gold prices rose for the third consecutive day. Traders noted that this decrease in oil prices was due to expectations of lower demand for crude oil because of refinery shutdowns caused by Hurricane Harvey. Nevertheless, about 5.5% of U.S. crude oil production, equivalent to 96,000 barrels per day, was suspended from the Gulf of Mexico on Sunday, September 3. Over the weekend, some refineries and oil pipeline operations along the Gulf Coast gradually resumed activities, raising hopes that the damage from the hurricane to energy infrastructure would be less than initially feared. However, many analysts believe it will take months for the U.S. oil industry to recover from the damage caused by Hurricane Harvey. The Texas governor estimated the storm's damage at $150 to $180 billion, significantly more than the damages from Hurricanes Katrina and Sandy, which caused extensive damage in New Orleans and New York in 2005 and 2012, respectively.