Harvey throws ‘wrench’ into US energy engine
Gasoline futures jump
HOUSTON, Aug 28, (RTRS): A hurricane in the heart of the US energy industry is set to curtail nearrecord US oil production for several weeks, with the impact expected to reverberate throughout the country and across international energy markets.
Harvey hit the Texas shore as a fierce Category 4 hurricane, causing massive flooding that has knocked out 11 percent of US refining capacity, a quarter of oil production from the US Gulf of Mexico, and closed ports all along the Texas coast.
Gasoline futures jumped as much as 7 percent to their highest level in more than two years in early Monday trading in Asia as traders took stock of the storm’s impact.
The outages will limit the availability of US crude, gasoline and other refined products for global consumers and further push up prices, analysts said.
Damage assessments could take days to weeks to complete, and the storm continues to drop unprecedented levels of rain as it lingers west of Houston, home to oil, gas, pipeline and chemical plants. And restarts are dangerous periods, as fires and explosions can occur.
Jefferis
Refined
So far, the federal government has not announced if it will release barrels of oil or refined products from the nation’s Strategic Petroleum Reserve (SPR), which holds nearly 680 million barrels of oil.
The SPR was established in the 1970s to prevent supply shocks in the wake of an embargo imposed by several members of the Organization of the Petroleum Exporting Countries (OPEC).
“This is not like anything we have ever seen before,” said Bruce Jefferis, chief executive of Aon Energy, a risk consulting practice. It is too soon to gauge the full extent of Harvey’s damage to the region’s energy infrastructure, he said.
More than 30 inches (76 cm) fell in the Houston area in 48 hours and a lot more rain is forecast, according to the National Weather Service.
The storm was felt from coastal ports to inland oil and gas wells. Oil producers in the Eagle Ford shale region of south Texas have halted some operations.
At least four marine terminals in the Corpus Christi area, an export hub for energy deliveries to Latin America and Asia, remained closed due to the storm.
Damage
“We just simply don’t know yet the damage all this rain will have on Houston’s energy infrastructure,” said Andrew Lipow, president of energy consultancy Lipow Oil Associates LLC.
Texas refineries could be offline for up to a month if their storm-drainage pumps become submerged, he said.
As the storm churned towards Texas on Friday, US gasoline futures rose to their highest level in three years for this time of year. Those gains came even before several large Houston area refiners, including Exxon Mobil Corp, halted some operations.
Exxon closed the second largest US refinery, its 560,500 barrel-per-day (bpd) refinery in Baytown, Texas, complex because of flooding. Royal Dutch Shell Plc also halted operations at its 325,700-bpd Deer Park, Texas, refinery. The refinery may be shut for the week, it said.
Flooding on highways between Houston and Texas City nearer to the coast led Marathon Petroleum Corp to cut back gasoline production at the company’s 459,000-bpd Galveston Bay Refinery in Texas City, said sources familiar with plant operations.