March 21 2018

Oil prices rise; U.S. crude set for steepest fall in a year

March 21 2018, 12:22 | Clarence Walton

Oil prices rise; U.S. crude set for steepest fall in a year

Oil prices rise; U.S. crude set for steepest fall in a year

"Hurricane Harvey has significantly impacted the entire Texas gulf coast with the petroleum refining centers of Corpus Christi, Houston, Port Arthur, Beaumont, and Lake Charles, La., either completely shutdown or [having] significantly scaled back operations", according to a statement released by the Port of Corpus Christi. Restarting plants even under the best conditions can take a week or more.

Long lines could pop up next in states in the East and Southeast, as far north as NY, which get much of their gasoline from the Colonial pipeline that taps into refineries in Texas and Louisiana.

With roughly 1.95 million barrels per day of refining capacity down, refined products supplies should tighten, with major Texas Gulf Coast ports of Corpus Christi and Houston closed to vessel traffic, imports and exports of crude and refined products will be delayed.

The effect of Hurricane Harvey on Northwest gas prices has so far been minimal, though states in the Southeast, Midwest and Mid-Atlantic are seeing price spike. Explorer Pipeline, which runs from Texas to Chicago, will shut two lines early on Wednesday.

"The market focus seems to be on the quantity of refinery capacity shut-ins and potential to hit oil demand", said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. The sale was the first in a series of planned draw-downs through 2025 totaling nearly 190 million barrels, or 27 percent of the reserve.

Onshore oil production continues to have approximately 300,000 - 500,000 barrels per day of production shut in. "Time will tell as to when refineries can return to full operational status, and weather Oklahoma will experience any significant price increases at the pump".

Harvey, the strongest storm to hit the US since 2004, is throwing the energy market into disarray.

GasBuddy said this Labor Day weekend is expected to be the second lowest in gas prices per gallon in more than a decade for California. Tom Kloza is with Oil Price Information Service. Prices rose with the demand: One Chevron station in downtown Dallas that sold regular gas for $2.29 a gallon just before the storm was charging $2.99 on Thursday.

In another sign of how Harvey is opening rarely used trading routes, at least three tankers carrying diesel have been booked out of Europe and the Mediterranean to go to Brazil, which also usually draws large volumes from the U.S. Gulf Coast. Total SA's refinery in the same area had a power loss while Valero Energy Corp.'s nearby facility was also said to be shutting.

Since Harvey made landfall a week ago, the storm, which has since weakened to a tropical depression, has crippled more than 20% of US refining capacity, according to analysts.

Indian refiners have turned their sights to crude from the USA as they are keen to diversify their crude import sources as arbitrage opens due to global oil supply cuts.

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