Storm threatens to halt oil deliveries

DALLAS — The mutual dependency of pipeline companies and refiners is being magnified as Tropical Storm Harvey takes its toll on the Gulf Coast, putting at risk the U.S. shale boom.

With a number of refineries in the region closed by the storm, pipelines have fewer places to deliver oil carried from prolific West Texas shale basins. When pipelines close, the refineries still open have less oil to process. Ultimately, producers may find their oil stranded with their route to the coast limited.

A few more days isn’t a problem, according to Libby Toudouze, a partner at Cushing Asset Management LP. But if the Gulf Coast closures continue into and past next week, it could spur a ripple effect across the industry, she said.

“If there’s no place for it to go, you can’t keep jamming more crude into the line,” Toudouze said in a telephone interview.

Marathon Petroleum Corp.’s Galveston Bay refinery in Texas City, with a capacity of 451,000 barrels a day, may be forced to halt production within several days because it is running out of crude, a person familiar with operations said on Monday. Its oil comes via Magellan Midstream Partners LP, which suspended use of its pipeline in the area on Sunday.

Magellan didn’t immediately respond to a request for comment. Marathon declined to comment on operations at its plant.