Hurricane Irma is expected by Goldman Sachs to have a negative impact on oil demand, but the firm said it sees a larger hit to oil demand from hurricane Harvey, “given the large concentration of energy-intensive petrochemical activity in its path.”
The firm noted it doesn’t expect Irma, which made landfall Sunday in Florida, to have an impact on oil production or processing. “Although Irma will be a more powerful hurricane than Harvey with potentially greater destruction, the negative impact on oil demand will be smaller,” than that of Harvey, which hit southern Texas in late August, the firm said, adding “this is because Texas has twice the oil consumption per capita of Florida given the significant concentration of refining and petrochemical capacity on the US Gulf Coast.”
Goldman Sachs is tentatively estimating Harvey’s impact on demand at about 600,000 barrels a day in the month following landfall, while the firm sees Irma’s initial impact at around 300,000 barrels a day.
The firm said “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.”
The post-storm recovery is likely to bring oil demand to a higher level over the next several months, the firm said, helping to gradually offset the negative initial impact. Still, it noted “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.”