Arab Times

Harvey slams region’s economy, with damages in the billions

Midwest refiners eye best quarter in two years as storm hits rivals

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DALLAS, Aug 29, (Agencies): Flood damage from Harvey is likely to reach into the tens of billions and the storm is expected to cause the region’s economy to shrink, at least in the near term.

Harvey is soaking refineries along the Gulf Coast, leading to higher prices at the pump. Gasoline futures rose nearly 3 percent Monday.

The storm could also put a kink in the shipment of consumer goods.

Harvey, which hit the coast as a Category 4 hurricane, will likely affect the South Texas economy for months. Mark Zandi, chief economist at Moody’s Analytics, predicted that the region’s economic output will be cut about 1 percent, or $7 billion to $8 billion. It will recover, he said, helped by money from insurance payments and government aid to rebuild.

Here’s a look at the effects on key industries:

Refining: Prices are expected to spike over the next week or more as about 10 refineries representi­ng more than 15 percent of the nation’s refining capacity are shut down.

Nearly 3 billion barrels of the 18 billion US daily refining capacity has been knocked out. Most of the shut-downs have been precaution­ary, with only a few reports of minor flooding.

But the slow-moving nature of the storm means it could cause shutdowns to linger and leave more-lasting damage, said Goldman Sachs analyst Damien Courvalin. Another 850,000 barrels per day of capacity remains under threat, he said.

Exxon Mobil closed its huge Baytown refinery, which lies along the Houston Ship Channel, 25 miles east of the city. The plant can handle up to 584,000 barrels of oil per day. It turns that into gasoline and chemicals used in everything from shrink wrap to car tires.

Several other refineries closed, including a Royal Dutch Shell plant along the ship channel, and several in Corpus Christi, Texas, that are operated by Valero Energy, Citgo and Flint Hills Resources.

Gas stations in Houston are running dry. Rick Joswick, an analyst with S&P Global Platts’ PIRA Energy, said it remains to be seen whether distributi­on terminals were damaged, which could crimp supplies beyond Houston.

Oil and gas: Oil companies have removed workers from about 100 platforms in the Gulf of Mexico since late last week. About 19 percent of oil production in the Gulf has been stopped, but that is down from nearly 25 percent on Saturday, according to the US Bureau of Safety and Environmen­tal Enforcemen­t. The Gulf accounts for about one-fifth of US oil production.

Shipping: All major ports in the Houston and Corpus Christi areas remained closed Monday and might not open for several days until the week.

That would affect barge shipments of gasoline to the East Coast — if refineries have resumed operating. Several large container ships that were headed to Houston anchored off Mexico or Louisiana to wait out the storm. The port of Houston also handles export shipments of grain.

The ports can’t reopen until the US Coast Guard and ship pilots are confident shipping channels are clear and not obstructed by silt washed into bays by the heavy rain. Silting has been reported near the ports of Freeport and Houston, according to S&P Global Platts.

Travel: Houston’s two big airports are expected to remain closed to all but relief flights until later this week, with runways flooded and nearby roadways under water. LONDON, Aug 29, (RTRS): Record oil and refined products stocks will cushion potential shortages caused by Hurricane Harvey, the Internatio­nal Energy Agency (IEA) said on Tuesday, adding that it could release emergency oil stocks in the event of extended outages.

Some crude production and about 2 million barrels per day (bpd) of refining

More than 1,600 flights on Monday were canceled, the bulk of them at Bush Interconti­nental Airport and Hobby Airport, according to tracking service FlightAwar­e.com.

The Federal Aviation Administra­tion said Bush Interconti­nental was expected to reopen Thursday and Hobby on Wednesday. Those targets might be optimistic. Bill Begley, a spokesman for the airports, said they would not reopen until officials are certain they’re safe, “and I don’t even want to put a deadline on that.”

Exceptions have been made for flights carrying people who were trapped at the airports when the storm hit. United Airlines took 272 passengers to Chicago on Sunday and planned two more such flights Monday, said Charles Hobart. Two Spirit Airlines planes took 180 passengers to Chicago and Detroit, and Southwest flew 486 passengers to Dallas on Sunday aboard five planes, according to airline and airport officials.

Insurance: Property damage from Harvey will likely be counted in the tens of billions of dollars, according to Moody’s Analytics, but the insurance capacity has been shuttered as Harvey has battered Texas, causing at least eight deaths and catastroph­ic flooding.

Though the IEA said on Monday that it still saw no need for a release of emergency stocks, the head of the global energy watchdog’s Oil Markets Division says the organisati­on is monitoring the situation closely.

“If there is a continued shortfall of

industry will be on the hook for only a small portion of that. Much of the burden will fall on taxpayers.

AIR Worldwide, which advises companies on managing risk, estimates that Harvey caused between $1.2 billion and $2.3 billion in wind and storm damage. Another analytical firm, CoreLogic, forecasts between $1 billion and $2 billion. Risk Management Solutions says it could be $6 billion, but likely much less.

Don Griffin, a vice president at the Property Casualty Insurers Associatio­n of America, said insurance companies are well capitalize­d and able to pay claims.

Those estimates, however, don’t include damage from flooding because that is usually covered by federal flood insurance, not homeowner policies.

AIR estimates that $60 billion in property in Harris County, where Houston is located, is insured by the national flood program, which already owes the US Treasury more than $20 billion for money it borrowed to cover past storms.

Banking: Many businesses in the Houston area are flooded, including banks. fuels we will act,” the IEA’s Neil Atkinson told Reuters on Tuesday.

The IEA and the US Department of Energy continue to assess the damage but it is too early to say what action, if any, would be needed, Atkinson said.

“These are very early days. We know of refinery shutdowns and (crude oil) production that has come down.

“In areas without power, it is back to a cash-only economy in terms of securing food, medical supplies and other necessitie­s,” said Greg McBride, chief financial analyst at Bankrate.com.

Many banks and credit unions will set up mobile branches to let customers get cash or apply for loans, he said.

US refiners in the Midwest will be among the biggest winners after Hurricane Harvey dealt a blow to their competitor­s on the US Gulf Coast.

Refiners such as PBF Energy and HollyFront­ier that are not hit by Harvey are on course for their best quarter in two years amid fears of fuel shortages that helped push profit margins for making gasoline up as much as 21 percent on Monday.

The US refining industry enjoyed strong margins in recent weeks and the fallout from the hurricane is likely to extend the bullish run for weeks. Midwest refiners have the added advantage of pricing their fuel based on benchmark prices in the Gulf Coast markets, which hit five-year highs on Monday.

“The Midwest refineries are best positioned. They will get the same boost in What we don’t know is how long these closures will be,” he said.

Record inventorie­s, however, are expected to buffer any supply shortfalls.

Current US commercial stocks stand at about 1.3 billion barrels, including 450 million barrels of crude, the IEA says. That excludes strategic petroleum reserves (SPR).

prices without the disruption,” said Mark Broadbent, a refinery analyst with Wood Mackenzie.

PBF Energy shares closed on Monday up 8.3 percent, while HollyFront­ier ended the day up 6.5 percent.

Valero and Phillips 66, refiners with significan­t capacity shuttered in the Gulf, closed the day up just 1.1 percent and 0.28 percent, respective­ly.

More than 2 million barrels per day of US refining capacity remain shut because of Harvey, which slammed into the Texas coast near Corpus Christi late on Friday. Restarting those plants even under the best conditions can take a week or more.

Compoundin­g matters is that the Houston Ship Channel, a prime artery for crude supplies, could be closed for an extended period of time.

The storm is set to keep dumping torrential rain on the state for days, potentiall­y delaying refinery restarts. If any of them are damaged, strong profit margins for other refineries will last longer.

“Once the rain stops, we finally can get assessment of any damage and how long this will take,” said Broadbent.

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