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

HOUSTON/NEW YORK: Tropical Storm Harvey’s impact on the energy industry spread beyond flooding US refiners as fuel pipelines were also shut, threatening to squeeze national supply and roil global fuel markets as US retail fuel prices continue to climb.

The storm, which lashed Louisiana with rain yesterday, has pummelled the US Gulf Coast, immersing Houston, Texas and the surrounding area in several feet of water and forcing the closure of about a quarter of US refining capacity. Benchmark US petrol (gasoline) prices and margins surged anew yesterday. The jump came after the Colonial Pipeline, the biggest US fuel system, said it would shut its main lines to the Northeast by yesterday amid outages at pumping points and lack of supply from refiners.

That artery can carry 3 million barrels of petrol and other products daily.

At least two East Coast refineries have run out of petrol for immediate delivery as they scrambled to fill barges for markets normally supplied by the Gulf Coast, two refinery sources said.

Others were seen running at higher rates to boost profitability by filling shortages. “This is going to be the worst thing the US has seen in decades from an energy standpoint,” said an East Coast market source, who declined to be named.

Analysts at Goldman Sachs and Stifel said infrastructure outages could last several months, although it was difficult to estimate the exact damage. Concerns over fuel shortages ahead of the US Labor Day extended weekend were mounting, said analysts at JBC Energy.

US petrol futures topped US$2 (RM8.60) per gallon for the first time since 2015, with benchmark prices up more than 20% since the Aug 23 close, just before the storm began. US crude oil prices were on track for their steepest monthly losses in more than a year. Average US retail fuel prices have surged by more than a dime per gallon from a week ago, the AAA said early yesterday.

The Gulf makes up nearly half of total refining capacity in the United States, the world’s largest net exporter of refined petroleum products, and the storm is set to impact global flows.

About 4.4 million barrels of US refining capacity have been shut by Harvey, including the nation’s largest refiner, Motiva Port Arthur, which can process more than 600,000 barrels a day. The total shut-in is about 24% of US refining capacity, almost equal to Japan’s daily consumption.

Traders in Europe scrambled to reroute cargoes to the US and Latin America to fill the gap left by refining and shipping closures, but supplies may not arrive fast enough to avert a crunch.

“Sourcing additional barrels from Europe is a potential solution, but an increased level of uncertainty is introduced surrounding the timeliness of delivery given the logistics of travel time and securing tankers,” said Michael Tran, director of global energy strategy at RBC Capital Markets.

The crippling of the US Gulf Coast refining hub by Harvey rattled global fuel markets yesterday as traders rushed to buy petrol and diesel from distant markets to avert supply shortages in the Americas.

Refiners in Asia have also been trying to fix fuel cargoes to the US, despite the massive distance across the Pacific.

The Asian refining margin yesterday hit US$10.41 a barrel, the highest since January 2016. Petrol prices in the region were US$16.34 a barrel, also the highest since January 2016.

Traders have said a slew of petrol tankers was booked over the past two days out of Europe to the United States and Latin America.

Meanwhile, US crude oil prices are on track to post the steepest monthly losses in more than a year on yesterday as concerns spread over falling demand in the world’s top oil-consuming country after storm Harvey knocked out almost a quarter of its refineries.

US West Texas Intermediate crude futures were set to close the month down 8%, their steepest monthly loss since July 2016. They traded at US$46.09 a barrel at 1201 GMT, up 13 cents on the day, after falling more than 1% on Wednesday.

International benchmark Brent crude was at US$51.22, up 36 cents from the previous session, when the contract fell more than 2%. – Reuters