It is estimated that Hurricane Harvey may have claimed millions of oil barrels out of the U.S energy market.
Oil production takes a hit:
Due to the hurricanes, fuel prices are expected to rise in the coming days which will in turn increase gasoline and airline ticket.
According to information provided by S&P Global Platts, nearly 2.2 million barrels per day of refining capability has been brought to a halt by the hurricane over the weekend. Houston area refineries are the worst affected due to wide scale flooding, while refineries in Corpus Christie located close to hurricane’s impact zone was closed 12 hours before landfall.
Refineries have not reported any damages until now but the production of 1.9 million barrels have taken a severe hit over the weekend when the hurricane made landfall and changed into a tropical storm. The oil delivery pipelines have been clogged as well with three major ones listed.
- The Magellan Midstream pipeline: Suspended operations on their BridgeTex and Longhorn pipelines. The two pipelines carry a combined 675,000 barrels of crude per day out of the Permian Basin in Texas to the Gulf Coast to be refined into fuel. BridgeTex runs from Colorado City in the Permian Basin to the Houston Ship Channel and has a capacity of 400,000 barrels a day. Longhorn transports 275,000 barrels a day of crude from the Permian’s Midland to the ship channel.
- Kinder Morgan shut down “select systems” of its 300,000 barrels per day crude pipeline in Texas. The company is also implementing a partial shut down of its Double Eagle, Texas Gas Pipeline, Texas Natural Gas Pipeline and the Texas Interstates systems.
- One of the bigger lines, Colonial Pipeline, said it does not expect any operational issues from tropical storm Harvey. Colonial’s gasoline-only pipeline runs all the way from Pasadena to Greensboro, North Carolina, which ultimately connects to a send and third line going on up to New Jersey for a combined total of more than two million barrels a day and these pipelines are in good shape.
Traffic suspended:
Another major impedance to the current situation is that major Gulf Coast ports in Corpus Christi and Houston still closed to vessel traffic as of late Sunday. That makes it harder for oil imports to arrive via those ports, where traditional refining capacity is waiting to turn that crude into gas and jet fuel, for example.
Also worth noting, those same Gulf Coast refiners exported nearly 3 million barrels per day of refined products (namely gasoline and diesel) in May, primarily to Latin America and Europe.
PIRA Energy Group, a unit of S&P Global Platts, estimates Texas’ total crude export capacity to be 2.5 million barrels a day, of which 930,000 daily comes from Corpus Christi/Brownsville and 910,000 barrels come from the Greater Houston area.
The market is likely to reassess oil futures on Monday, with Barclays Capital forecasting higher crude and gasoline prices in the months ahead. Higher oil prices is good or commodity exporters and oil-heavy economies like Russia.
Temporary waivers issued:
The Environmental Protection Agency issued temporary waivers for parts of Texas required to use reformulated fuels under the Clear Air Act to ensure ample supplies of gasoline and diesel. The Texas Commission on Environmental Quality asked the EPA for waivers for gasoline and diesel in 30 of Texas’ 254 counties. The waivers are in effect until September 15, but could be extended, based on Platts’ information.
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Source: Forbes
