US gasoline price surges; crude falls as Harvey hits

NEW YORK — Gasoline prices surged to two-year highs on Monday as tropical storm Harvey knocked out several refineries and disrupted fuel production, while a back up in crude supplies pushed US crude oil futures down more than 2.50%.

Massive floods caused by the storm forced several refineries to close along the US Gulf Coast. Sources said the Motiva Port Arthur refinery in Texas, the country’s largest refinery, was considering shutting down as water poured into the plant. Motiva planned a final decision Tuesday morning, sources said.

“This flooding issue could be a persistent issue with the staff unable to repopulate the facilities,” said John Kilduff, partner with energy hedge fund Again Capital in New York.

“Gasoline inventories could decline rapidly if we get an extended shutdown.”

Spot prices for US gasoline futures surged 7% to a peak of $ 1.7799 per gallon, the highest since late July 2015, before easing to settle at $1.7123, up more than 3%.

Prompt US gasoline differentials in the Gulf Coast hit a fiveyear high.

US crude futures fell as the refinery shutdowns could reduce demand for American crude.

US West Texas Intermediate ( WTI) crude futures settled down $ 1.30 or 2.70% to 46.57. Brent crude futures were down 52 cents or around 1% at $51.89 per barrel.

The WTI discount versus Brent expanded to as much as $5.64 per barrel, its widest in two years.

Harvey, the most powerful hurricane to hit Texas in more than 50 years, killed at least two people, caused large-scale flooding and forced closure of Houston port and several refineries.

The International Energy Agency in Paris pledged to respond to major oil supply disruptions.

The US National Hurricane Center said Harvey was expected to linger through Tuesday, with floods spreading from Texas eastward to Louisiana. Texas is home to 5.60 million barrels per day ( bpd) of refining capacity, and Louisiana has 3.30 million bpd. Estimates say the storm has taken at least 2.40 million bpd of refining capacity offline.

US traders were seeking oil product cargoes from northern Asia, several refining and shipping sources told Reuters, with transatlantic fuel exports from Europe expected to surge. Goldman Sachs analysts said gasoline and distillate product refining margins were likely to rise more after the storm. “If ( US) refineries shut down for more than a week, Asia will need to run at a higher level, because there’s no spare capacity in Europe,” said Olivier Jakob, managing director of Petromatrix.

In Libya, pipeline blockades by militia have slashed output by nearly 400,000 bpd. —