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Oil prices hit by Hurricane Harvey

Oil prices

Hurricane Harvey has closed some US Gulf coast refineries, resulting in lower crude demand and lower oil prices. NASA photo.

Oil prices down as demand falls on refinery shut downs

UPDATE: Reuters is reporting that Motiva Enterprises is shuttering its 603,000 b/d refinery in Port Arthur, the largest in the United States. 

Heavy rains and flooding due to Hurricane Harvey have forced a number of US Gulf Coast refineries to shutdown operations, resulting in a lower demand for crude and falling oil prices.

US WTI was down by 52 cents to $46.05/barrel by 1:40 p.m EDT and Brent crude fell by 23 cents to $51.63/barrel.

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US gasoline futures were up around 4.21 cents to $1.7544/gallon, down from yesterday’s two-year high of $1.7799/gallon.

Over 3 million barrels per day (b/d) of refining capacity is offline due to Harvey.  That is over 16 per cent of total US capacity, based on company and Reuters estimates.

The US Gulf coast is home to nearly half of the total US refining capacity.

“That’s a reason why we’re seeing lower oil prices as a whole,” Mark Watkins, regional investment manager at U.S. Bank, told Reuters.  He added “We’re going to see a build up in crude inventories.”

The record-setting Harvey is moving eastward out of the Houston area and into Louisiana.  Some refineries are preparing to restart, but the area is still dealing with heavy rains that are expected to continue through to Wednesday.

As US production falters, European and Asian refineries are gearing up to replace the lost oil products.  The International Energy Agency said it could release emergency oil stocks, should the outages continue.

Reuters reports Barclays bank said in a note that Harvey’s impact would “linger for several more weeks”.

Disruptions in Columbia and Libya’s oil industries have affected crude supply somewhat.

Militia pipeline blockades in Libya have closed three oilfields and forced the country’s National Oil Corp to declare a force majeure at a number of sites.

In Columbia, the leftist ELN rebel group is taking credit for a bomb attack on the country’s second-largest oil pipeline which stopped pumping operations along the line.

Later on Tuesday, the American Petroleum Institute will release its data on US crude stocks and on Wednesday, the US Energy Information Administration will released its oil inventory data.

 

Posted in: Energy Financial

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