US gasoline futures surge after Harvey, euro gains on Draghi comments

SINGAPORE: US gasoline futures hit a two-year high yesterday as Hurricane Harvey pummelled the heart of America’s energy industry, while the euro rose to a 2-1/2-year peak after the European Central Bank President refrained from talking down the single currency.

Gasoline futures soared as much as 6.8 per cent at one point as the storm battered Texas, whose coastal refineries account for a quarter of US crude oil refining capacity.

Though it has been downgraded to a Tropical Storm, Harvey was still lashing the region on Monday, with some areas expected to see a year’s worth of rainfall in the span of a week.

“This is not like anything we have ever seen before,” said Bruce Jefferis, chief executive of Aon Energy, a risk consulting practice, adding it was still too early to gauge the full extent of damage to the region’s energy infrastructure.

US economic growth was more than halved in the quarter after Hurricane Katrina mauled Louisiana in August, 2005, but quickly bounced back by early 2006 as reconstruction began and gasoline prices moderated.

Harvey has knocked out a quarter of oil production from the Gulf of Mexico, prompting fears it could overturn years of US excess oil capacity and low prices, with disruptions reverberating through global energy markets for weeks.

After surging on Friday, crude oil prices were mixed on Monday as markets tried to gauge Harvey’s impact on oil production.

Brent futures, the global crude oil benchmark, rose 0.3 per cent to US$52.55 a barrel, adding to Friday’s 0.7 per cent increase.

But US crude futures pulled back 0.3 per cent to US$47.71, after Friday’s 0.9 per cent gain.

Despite gains in energy shares in much of the region on higher oil prices, Asia-Pacific stock indexes got off to a subdued start as investors waited to see how much damage the storm had inflicted.

MSCI’s broadest index of AsiaPacific shares outside Japan and Japan’s Nikkei were both little changed.

Australian shares slid 0.6 per cent, and South Korea’s KOSPI was down 0.3 per cent.

The euro surged after ECB president Mario Draghi, speaking at the US Federal Reserve’s annual conference in Jackson Hole, Wyoming, failed to cite the common currency’s strength as a concern or discuss monetary policy specifically.

Instead, Draghi said the central bank’s ultra-easy monetary policy was working and the euro zone’s economic recovery had taken hold. — Reuters