Published: Fri, September 01, 2017
Hi-Tech | By Ellis Neal

Harvey knocks out more refineries, shifting global oil flows

Harvey knocks out more refineries, shifting global oil flows

When the US can't produce enough gasoline or diesel to meet export demands, other regions are forced to look for replacement supplies "and the backfill has to come from further away", said Richard Joswick, an analyst with S&P Global Platts.

The price premium on European gasoline products has already risen to its highest level in two years, which means higher profit margins for refiners on the Continent.

Gas stations will eventually have to respond by jacking up prices on consumers, at least temporarily. Prices in some cities have climbed much more than that and could keep rising toward an average of $2.60 to $2.75 a gallon in the next 10 days, said Tom Kloza, global head of energy analysis at the Oil Price Information Service.

Kloza predicted that refinery shutdowns will lift per-gallon gas prices by 15 to 25 cents nationally, up from his earlier estimate of up to 20 cents.

"Given the unprecedented flooding in the city of Port Arthur, it remains uncertain how quickly the flood waters will recede, so we can not provide a timeline for restart at this time", the company told AFP.

Meteorologists said that Harvey could be the worst storm in US history in terms of financial cost.

A Democratic senator on Wednesday urged U.S. President Donald Trump to tap the country's emergency gasoline or crude oil reserves to help alleviate motor fuel price spikes resulting from Tropical Storm Harvey.

Harvey has shut 24 percent of USA fuel output after refineries in Texas and Louisiana were flooded.

Multiple companies have chose to shut their refineries or reduce the output by half due to floods.

The US Gulf Coast is home to almost half of domestic refining capacity, with some 5.6 million bpd of capacity in Texas and 3.3 million bpd in Louisiana.

In other words, Harvey has disrupted about one-fifth of the country's total refining capability.

Crude prices, by contrast, fell as the closure of so many US refineries led to a slump in demand for the most important feedstock for the petroleum industry.

After settlement, sources told Reuters that Motiva Enterprises was shutting down the nation's largest refinery due to flooding.

The No. 2 USA refinery, ExxonMobil's Baytown, Texas facility, is also offline and has suffered some roof damage. "We have no idea when (the refineries will) come back on, the market is taking a wait and see approach". "Electrical power, ability of personnel to reach the refineries, and distribution of crude oil and petroleum products remain potential challenges to quickly restarting the refineries".

Half of the 26 refineries that connect to Colonial's pipeline system are between storm-ravaged Houston and Lake Charles, which is just east of the Beaumont-Port Arthur metro area, the AP reported. The Explorer Pipeline, which hauls about 660,000 barrels a day of gasoline, diesel, fuel oil and jet fuel from the Gulf Coast to the Midwest, was due to shut its main lines on Wednesday.

However, the extreme flooding could prevent some refinery workers from being able to return to work.

"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 as he was not authorized to speak to the press.

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