Global fuel market prices jump as Harvey's impact spreads beyond US Gulf

Jerome Frank
September 1, 2017

Nearly 3 million barrels of oil a day can't be refined into gasoline and other products - about 16% of USA refining capacity, according to Goldman Sachs.

Hurricane Harvey is sending pump prices higher for USA motorists and causing temporary shifts in the flow of oil and gasoline around the world after taking down a huge chunk of US refining capacity. "Although this is less than 20 percent of total refining capacity in the United States, the Gulf Coast region is a major supplier of refined products both locally, and into other parts of the country", Delaney said.

Portions of the refinery were flooded after more than a foot of rain dropped overnight. Explorer shut two main lines carrying fuel to the Chicago market Tuesday, and the main Colonial Pipeline to the US East Coast was running at reduced rates.

Crude oil prices continued to lose ground because of the fallout from Tropical Storm Harvey, though prices may be supported by tensions over North Korea.

Last week, EIA said output climbed to 9.53 million barrels per day, nearing the record high of 9.61 million reached in June 2015.

"Immediately tapping the SPR, including using the SPR authority to release gasoline from the Northeast Gasoline Supply Reserve, could help protect consumers by putting downward pressure on markets and combating any market speculation that may be occurring", Markey said in the letter to Trump.

This makes it likely that traders in Asia will be especially tempted to book USA cargoes priced against WTI in favour of other light crude grades priced against Brent.

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Oil Prices Set To Rise as Supply-Demand Gap Closes Up
Refinery closures has shifted gasoline futures higher however, as it makes the product harder to come by and thus priced higher. Flooding from Hurricane Harvey is devastating the Houston and Galveston areas of Texas, major hubs for US oil refining.

The Energy Department "will continue to provide assistance as deemed necessary, and will continue to review incoming requests for SPR crude oil", spokeswoman Jess Szymanski said.

With markets Monday fearing demand for crude could be hit, USA benchmark West Texas Intermediate (WTI) sank $1.30, while Brent finished 52 cents lower.

Hurricane Harvey hit the U.S. Gulf coast last Friday.

At a Fort Worth Costco, customers were greeted with pre-hurricane prices, just a fraction over $2.06 per gallon.

Kloza predicted that refinery shutdowns will lift per-gallon gas prices by 15 to 25 cents nationally, up from his earlier estimate of up to 20 cents.

Motiva Enterprises chose to close its 603,000bpd plant in Port Arthur, Texas, while Total halved the output of its refinery, which is in the same area. Total SA's 225,500-bpd Port Arthur, Texas, refinery was shut by an early-Wednesday power outage, Gulf Coast market sources said. For example, Reuters reported that Motiva was weighing cuts at its refinery not only because of the risk of floods, but also because it was having trouble obtaining enough crude from all the service interruptions elsewhere.

Other reports by Guamnewswatch

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