Tropical Storm Harvey Affects A Fifth Of US Fuel Output
Houston: Flooding from Tropical Storm Harvey has shut nearly a fifth of the United States' oil-refining capacity, triggering worries about a gasoline supply crunch as the slow-moving tempest lumbers through the heart of America's petrochemicals industry. At least 3.6 million barrels per day of refining capacity are offline in Texas and Louisiana, or nearly 20 per cent of total US capacity, based on company reports and Reuters estimates. Restarting plants even under the best conditions can take a week or more.
As a result of the outages, major pipelines carrying gasoline, diesel and jet fuel started to adjust deliveries or close lines outright because of a lack of supply. US gasoline futures surged 4 per cent to settle at their highest in more than two years.
The US Gulf Coast is home to nearly half of domestic refining capacity, with some 5.6 million bpd of capacity in Texas and 3.3 million bpd in Louisiana.
More refinery closures were expected, as parts of Texas have received more than 4 feet (1.2 metres) of rain. Fuel prices were expected to keep rising as refining capacity remains down and pipelines run short. Explorer Pipeline, which runs from Texas to Chicago, will shut two lines early on Wednesday.
"These closures are already impacting markets, with crude prices lower on a perceived drop in demand and gasoline prices spiking in response to lower supply," said Sandy Fielden, director of oil and products research at Morningstar.
Colonial Pipeline, the key artery sending gasoline up the East Coast, was still shipping barrels there but had faced flooding at origination points in Texas.
The US Northeast was already dealing with reduced supply. Philadelphia Energy Solutions, the region's largest refiner, said it had sold all its available regular gasoline barrels because of increased demand, while Monroe Energy's refinery had increased runs.
"Harvey will raise product prices nationwide, denting demand, especially in September," said Barclays analysts in a note on Tuesday.
US West Texas Intermediate crude edged down 13 cents, or 0.3 per cent, to $46.44 a barrel.
In cash trading, the spread between Gulf Coast gasoline prices and benchmark futures rallied further, a day after hitting a five-year high in anticipation of constrained supply. That price was lately 24 cents above benchmark futures , traders said.
Gasoline prices rise
Retail gasoline prices have started to rise, too, with the average gallon of gasoline rising 1 cent overnight to $2.38 nationally. The average price in Texas rose 2 cents to $2.19 per gallon.
Motiva Enterprises began shutting down its 603,000-bpd Port Arthur, Texas, refinery, the nation's largest, on Tuesday evening because of flooding within the plant, said sources familiar with plant operations.
Valero Energy Corp shut the large crude distillation unit and the gasoline-producing fluidic catalytic cracking unit at its 335,000-bpd Port Arthur, Texas, refinery.
Marathon Petroleum Corp was shutting two refineries in the Houston area on Tuesday because of flooding, according to sources familiar with plant operations. The 459,000-bpd Galveston Bay Refinery in Texas City, Texas, 45 miles (72 km) south of Houston, has flooding in its tank farm and on nearby streets, the sources said.
Exxon has shut its 362,300-bpd Beaumont refinery in east Texas because of high water in the plant, said sources familiar with the plant. The company earlier shut production at its Baytown, Texas, refinery, the nation's second largest.
