Both the U.S. Energy Information Administration and the American Petroleum Institute reported massive drawdowns in domestic crude inventories this week, but oil prices remained lower Wednesday morning as the market continued to focus on the potential magnitude and duration of the impacts of Tropical Storm Harvey.
West Texas Intermediate crude contracts for October delivery traded down 1% to $45.97 per barrel shortly after 1:30 p.m., while global benchmark crude futures sank 2% to $50.95 a barrel.
In a largely bullish Wednesday report, the EIA said commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 5.4 million barrels during the week ended Aug. 25., At 457.8 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Consensus estimates called for a draw of 1.9 million barrels of crude.
Meanwhile, neither the EIA nor the API reports indicated a slowdown in refinery inputs as the data runs through the morning of Aug. 25, prior to the first landfall of Harvey.
The EIA reported that U.S. crude oil refinery inputs averaged over 17.7 million barrels per day during the past week, 264,000 barrels per day more than the previous week's average, according to the EIA. Refineries operated at 96.6% of their operable capacity last week, the agency said.
Still, more volatile inventory and refinery data is likely to come in the weeks ahead, which could be helping to keep oil prices down near term, according to analysts at energy-focused investment bank and research firm Tudor, Pickering, Holt & Co.
Seaport Global Securities LLC analysts also were concerned with the storm's impact Wednesday, pointing out that Harvey has now taken offline 3% to 4% of U.S. oil production, 20% of Gulf of Mexico production, 0.6% of U.S. gas production, 20% of Gulf of Mexico gas production, and about 4.1 million barrels per day of refining capacity in the Gulf, which is 20% of the total U.S. refining machine.
"Now with the Motiva refinery at 605 Mbpd (the largest in the US) running at 60%, this is going to be a much bigger problem as we come to the other side of this nightmare as less crude is pulled through the system and less gasoline/distillate is being produced," the firm wrote in a Wednesday note.
Seaport also pointed out reports of a possibility that Harvey's remnants could redevelop into a tropical depression over the Gulf of Mexico in the next day or two, with potential targets on the Texas coast and northeast Mexico.
The report comes as forecasters track a trough of low pressure brewing off the coast of the Bahamas, which has the potential to develop into a storm as it heads toward the coast of east coast of Florida.
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