Hurricane Harvey To Send Gas Prices Higher As Refineries Remain Shutdown

Flooding, destruction and high fuel prices cut oil demand by nearly 1 mb/d in the aftermath of the 2005 hurricanes, roughly twice as much as the usual seasonal downturn from August to September, they pointed out.

The data will tend to be overshadowed by uncertainty surrounding production and refining capacity following Harvey with expectations that reduced refining operations will undermine short-term demand for crude.

“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.

Harvey was forecast to come ashore in western Louisiana near the Texas border on Wednesday. That represents almost a quarter of USA refining production, and restarting plants under even the best conditions can take a week or more.

According to a report from AltaCorp Capital in Calgary, mid-continent refining profit margins have jumped by about 20 per cent this week, a development it said will boost the bottom lines of Calgary-based Husky (TSX:HSE) and Cenovus (TSX:CVE).

That compares with an average of about 500,000 tonnes of gasoline exported each week from Europe to the United States and Latin America.

Gasoline spot prices had spiked * a href=”http://oilprice.com/commodity-price-charts?1&page=chart&sym=RB*1″ *6.19 percent on Wednesday by 4:00pm EST, trading at $1.8936.

Meanwhile, 19.1 percent of natural gas production in the region, or 615.09 million cubic feet per day, has been shut in, BSEE said.

“The refineries shut down as a precaution might be able to restart”. “We have a supply disruption event in gasoline production”.

The coast took a step forward and a step back on Wednesday.

Perry said he’s authorized immediate shipments of crude to the Phillips 66 refinery in Lake Charles, Louisiana. However, inventories will likely rise from this week due to interruptions at refineries near Houston. Those gasoline inventories can now be drawn down to make up for the 10 refineries that have been shuttered by Harvey.

“The global implications of a stormy season in the U.S. Gulf of Mexico have mounted as the U.S. has emerged as a global energy hub”, said Ed Morse, head of commodities research at Citigroup Inc.in NY. US refiners produced record amounts of fuel during the summer.

With gasoline futures climbing, the AAA said retail gasoline prices were up 6 cents from a week ago at $2.404 per gallon of regular gasoline nationwide.

Motor fuel prices rose 2.7 percent and oil in NY slipped 2.7 percent.

The Eagle Ford shale basin lies in the path of the storm and producers in the region have idled production.