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article imageOil markets roiled as impacts from Harvey sink in with industry

By Karen Graham     Aug 28, 2017 in Business
Houston - Oil markets are in turmoil today as investors and other stakeholders assess the financial impact of Hurricane Harvey. In the meantime, gasoline futures are soaring while oil futures are going in the opposite direction.
The flooding from Harvey has put over 12 percent of America's refining capacity out of commission, at least temporarily, reports the Dallas News this morning.
"In terms of prices, it's obviously going to be a lot worse than what we were telling people on Friday," said, Patrick DeHaan, senior petroleum analyst for, referring to the slight price increase on Friday before the Category 4 hurricane made landfall on the Texas coast.
Dehaan expects gasoline prices to go up 15 to 25 cents a gallon along the coast, warning the price rise could go higher if more refineries close because of flooding at gasoline storage facilities. There's a "huge danger that the numbers could change in a moment's notice," he said.
James L. Williams of WTRG Economics said these major shutdowns are "enough to move markets." Williams added, "We don't know what damage there is in Corpus [Christi]. We don't know how far under water they are in Houston."
CC License: Attrition  no deriv.
CC License: Attrition, no deriv.
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Harvey roils the markets
With the Houston Port crippled and a number of refineries and some crude oil production down, Harvey's impact on the oil and gas market is having a ripple effect on prices as U.S. traders look to North Asia, seeking oil product cargoes.
According to some refining sources, transatlantic exports of motor fuel out of Europe are expected to surge.
“Global refining margins are going to stay very strong,” said Olivier Jakob, managing director of Petromatrix. “If (U.S.) refineries shut down for more than a week, Asia will need to run at a higher level, because there’s no spare capacity in Europe.”
Today, Brent crude futures were up 2.0 cents at $52.43 per barrel before falling into negative territory, while U.S. West Texas Intermediate (WTI) crude futures were down 74 cents to $47.13 a barrel.
The U.S. Bureau of Safety and Environmental Enforcement estimates that 379,000 barrels per day or 22 percent of offshore oil production has been halted. An additional 300,000 barrels per day of onshore oil production has been curtailed due to Harvey. At least five refineries were shut down ahead of the storm and more refineries shut down Sunday.
Exxon Mobil is shutting down its Baytown, Texas plant, the nation's second largest refinery, The plant has a 560,000 barrel a day capacity. But the closure of the Houston Ship Channel will end up distorting U.S. inventory figures for weeks to come, say experts.
Petroleum industry infrastructure damages
Damage assessments began on Saturday for four Corpus Christie oil refineries and they are still ongoing. Other refineries are preparing to begin assessments as soon as it is deemed safe to go into the facilities.
When a refinery has been shut down because of a hurricane, return to production will depend on the damages sustained, the amount of water that got inside the plant and more importantly, the availability of a power supply. Restarting production is an extremely dangerous time because of the risk of explosion and fire.
It may take several weeks before the full extent of the damages is known, but Rob Thummel, the portfolio manager at Tortoise Capital, which manages $15 billion in energy assets, told Business Insider, "I don't see it being an extended outage because of just the sheer need for [gasoline]."
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