WTI plummets to $48 as hurricanes weigh on refining activity

The barrel of West Texas Intermediate came under a heavy selling pressure on Friday and lost nearly 2% to drop to a 3-day low at $48. As of writing, the barrel of WTI was trading at $48.22, losing 1.75% on the day. 

"Buckeye Partners, the largest owner of oil storage facilities in the Caribbean, with 41.1 million barrels of capacity, on Thursday shut its Yabucoa oil terminal in Puerto Rico ahead of hurricane Irma and was preparing for the storm at two other marine terminals in Florida and the Bahamas. Fuel retailers in Florida were already struggling this week to keep up with demand from customers filling tanks ahead of the storm's expected Sunday landfall," Reuters reported in a recent article.

In addition to Irma, another category 4 hurricane, Jose, is forming in Atlantic while Hurricane Katia is plowing towards Mexico.

Brent only lost around 0.5% on the day, pushing its premium against WTI to its highest level of 2017 at nearly $6 a barrel. Despite today's retreat, the barrel of WTI is looking to close the week with gains following five straight weeks of losses as OPEC's higher compliance to reduce the output in August had a positive impact on crude oil prices. Moreover, Russia and Saudi Arabia said that the OPEC could extend the output cut deal if needed.

This week's data from the U.S. showed an increase in crude oil supplies but didn't weigh on prices as it was due to the hurricanes and was within the market's expectations.

• EIA: US commercial crude oil inventories increased by 4.6 mln barrels

Technical outlook

The barrel of WTI could face the initial hurdle at $49.40 (weekly high) ahead of the critical $50 (psychological level) and $50.45 (Aug. 1 high). On the downside, supports could be seen at $48 (psychological level), $47.15 (Sep. 5 low) and $45.60 (Aug. 31 low).