Prices at the pump
Gasoline rises to five-month high as hurricane nears.
Crude and gasoline futures both climbed to levels not seen since before the pandemic as Hurricane Laura rattled toward a key stretch of the Gulf Coast that’s home to the nation’s greatest concentration of refining capacity.
U.S. gasoline futures jumped 2.1 percent and crude futures added 1.7 percent Tuesday, bringing both contracts to the highest since early March.
The storm is expected to make landfall late today or early Thursday along the Texas-Louisiana coast as a Category 3 hurricane, according to the National Hurricane Center.
More than 84 percent of oil output in the Gulf of Mexico has shut, and refiners including Exxon Mobil Corp. and Citgo Petroleum Corp. have reduced operations or closed plants in preparation.
“The energy patch is facing a potentially cataclysmic situation in the next 48 hours,” in part as forecasts show “the storm on a collision course with some of the largest refineries in the world,” Bob Yawger, director of the futures division at Mizuho Securities USA, said in a note.
The spread between the September and October gasoline contracts rose to as high as 15 cents per gallon during the session, the widest backwardation in a year. The price action “implies the market is worried about extreme shortage,” Yawger wrote.
Some of the largest U.S. refineries are shutting in advance of Laura, affecting nearly 3 million barrels a day of capacity along the Gulf Coast, a Bloomberg calculation shows. That’s about one third of the Gulf Coast refining capacity, figures from Lipow Oil Associates indicate.
Still, the hurricane likely only will have a short-term impact on prices with this year’s lackluster summer driving season nearing an end and a pickup in consumption remaining questionable due to the pandemic.
“Even if the resumption of offshore production were to be slow, increasing the loss of supply, there is a large inventory buffer that precludes a sudden tightening of crude oil availability to refiners when they resume their operations,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.
U.S. crude stockpiles currently are at the highest seasonal level in decades, Energy Information Administration data show.
U.S. crude inventories fell by 4.52 million barrels last week and gasoline stockpiles fell by more than 6 million, the industry-funded American Petroleum Institute reported, people familiar said.
If confirmed by the EIA report today, it would be the fifthstraight weekly decline in crude stocks.
On the other hand, the API report showed another build in distillate supplies.
“The severe gasoline draw reflects careful inventory management for refiners and distributors to not be stuck with higher quality than they need come the middle of September,” as specifications change for the winter season, said Tom Finlon of GF International.
Meanwhile, cash-market gasoline for Colonial Pipeline loading outside Houston rose to the highest in eleven months Tuesday morning as retailers sought to secure supplies ahead of Laura.