Published: Tue, August 29, 2017
Global Media | By Abel Hampton

Oil markets roiled as Harvey hits USA petroleum industry

Oil markets roiled as Harvey hits USA petroleum industry

"The reduced inputs to those Gulf refineries will result in an increase in crude inventories", said Tony Headrick, energy market analyst at CHS Hedging, "That outweighs the outages in crude oil production from the storm".

Beyond the storm's potential impact on the oil industry, crude remains in ample supply globally despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to hold back production to prop up prices.

By now we've all seen the news reports, videos and photos of the devastation Hurricane (now tropical storm) Harvey has caused along the Texas Gulf Coast. "Prices will likely rise almost countrywide heading into Labor Day, from rural towns in the Rockies to major cities in the Midwest and West Coast- almost everyone will feel a bit of a pinch at the pump from Harvey".

Because Houston is the hub of the USA energy industry, we've been paying close attention to the impact on the region's production regions, both offshore and onshore, and to the refineries and petrochemical plants that dot the area.

"Katrina was the exception", Kloza said, referring to the 2005 storm that badly damaged Gulf Coast operations. It has since lost strength but is still dumping massive amounts of rain on the region, causing flooding that the National Weather Service has described as "unprecedented". In the aftermath experts expected that over 2 billion barrels a day of capacity would be shut down in the wake of the destruction.

"We already heard that some Asian refiners are trying to send gasoline to the USA, this is in addition to the traditional European supply", said Ehsan Ul-Haq, a director at energy consultancy Resource Economist Ltd. BHP Billiton has shut in about 99,000 barrels a day of oil and gas production, and Murphy has shut in 46,000 barrels a day of production.

Additionally, about 22% of the oil produced in the Gulf of Mexico was shut down as of Sunday, according to the Interior Department's Bureau of Safety and Environmental Enforcement.

Valero said it did not have "substantial refinery impacts" at its Corpus Christi and Three Rivers facilities. Reformulated gasoline for blending (RBOB) traded up about 10 cents at $1.60 a gallon.

Pipelines are not escaping the shutdowns.

Kloza said retail prices haven't gone up more significantly because gas stations "don't want to be the evil guy who raises prices during the storm".

"The "hangover" from the storm could be longer than people think", said Sandy Fielden, director of commodities and energy research at Morningstar in Austin, Texas.

Californias average is now $2.999 per gallon, with prices in Los Angeles, Oakland, Orange County, Redding, Salinas, San Francisco, San Jose, San Luis Obispo, Santa Barbara, and Santa Rosa all more than $3, the AAA says Monday.

Overall, however, the average price for regular-grade gas nationwide on Friday was $2.39 per gallon, down a half-cent from two weeks ago.

Space Coast motorists should brace themselves for higher gas prices for the next several days.

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