March 22 2018

Gas prices spike, up 17 cents since Hurricane Harvey

March 22 2018, 04:02 | Clarence Walton

Gas prices spike, up 17 cents since Hurricane Harvey

Gas prices spike, up 17 cents since Hurricane Harvey

"This release sends a message to the market that the USA government is willing to address any kind of supply shortages".

US West Texas Intermediate (WTI) crude futures were set to close the month down 8 percent, their steepest monthly loss since July previous year. The contract settled up 2.8% on Thursday. The global benchmark Brent crude climbed 2% to $51.87 a barrel.

Elsewhere on Nymex, gasoline futures for October slid 0.71% to $1.761 a gallon.

Hurricane Harvey has killed at least 35 people and brought record flooding to the U.S. oil heartland of Texas, paralysing at least 4.4 million barrels per day of refining capacity, according to company reports and Reuters estimates.

Canadian heavy crude differentials weakened to their widest level since late March on Friday, extending losses as ongoing refinery outages on the U.S. Gulf Coast following Hurricane Harvey slashed demand.

The US Energy Secretary has approved up to 4.5 million barrels of crude oil to be released from the Strategic Petroleum Reserve in response to the impact from Hurricane Harvey, reported a leading business daily.

Claytor also buys fuel from the Plantation Pipeline system, which originates in Louisiana and ends in the Washington, D.C., area. The proposal, on top of planned auctions expected over the next few years, could push the reserve below 300 million barrels by 2025. Overall gasoline demand hit a record in the week, hitting an estimated 9.85 million barrels per day. "This could close up to another 824,000 barrels per day (bpd) of capacity, giving an additional lift to fuel prices, while further depressing crude", BMI said.

In another sign USA consumers could see further gains in fuel prices, gasoline futures had their highest increase since March 2016 on Thursday. Gasoline was up 21.03 cents, or 11.2 percent, at $2.0950 at 1:53 p.m. (1753 GMT).

Harvey also shuttered about 23 percent of USA refining capacity, with multiple refineries in the Houston, Port Arthur and Beaumont, Texas, areas closed, including the nation's largest operated by Motiva Enterprises LLC.

"The department will continue to provide assistance as deemed necessary, and will continue to review incoming requests for SPR crude oil", Energy Department spokeswoman Jess Szymanski said in a written statement, using an acronym for strategic petroleum reserve.

As Harvey moved across the Southeast U.S. and weakened to a tropical depression, investors were also eyeing the potential for future disruption from a fresh storm brewing in the Atlantic Ocean.

The question now is how long it takes the closed refineries to get back online. "You do have some signs of rebalancing, regardless of Harvey".

Joe McMonigle, a former Energy Department official during the Bush administration, said Jones Act waivers would make it more economical for Northeast refiners to receive oil stuck in the U.S. Gulf rather than source it from Nigeria or other places overseas. Last year, they were at 5.188m on average - and rising. And price spikes are even more severe in some Southern states.

Together, the 18 refineries constitute 24.5 per cent of U.S. capacity.

"There's a huge logistical challenge going on at the moment because those refineries up and running don't have access to the oil they need", said Smith.

Expect to pay 20 cents or more for a gallon of gas over the next several weeks - or even months - as the petroleum industry hustles to get the sprawling array of refineries back in action after the devastation wrought by Hurricane Harvey, Texas energy analysts say.

Fill up now to avoid high prices but after the weekend, it may be unavoidable.

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