Harvey’s flooding knocks out US refineries

Source:Reuters-Global Times Published: 2017/8/29 17:38:40

Crude inventories in the country expected to increase by 1.4m bpd

Flooding from tropical storm Harvey caused ongoing large-scale US refinery outages on Tuesday.

Refinery shutdowns from the storm helped push US gasoline prices to 2015 highs of $1.7799 per gallon on Monday, although they receded slightly to $1.7320 per gallon on Tuesday.

Massive floods caused by Harvey forced several refineries to close along the US Gulf Coast, while heavy rains were spreading into the greater Houston area, which has already been hit by catastrophic flooding.

"Harvey's downpours will continue over Texas and Louisiana and slowly drift northward through the end of August, exacerbating the unprecedented flooding disaster that continues to unfold," said meteorological forecaster AccuWeather.

US refiners have been affected more than oil producers by Harvey, which has now been downgraded to a tropical storm.

Sources said Motiva will decide on Tuesday morning whether to shut the 603,000 barrel per day (bpd) Port Arthur refinery, the nation's largest, because of flooding.

"Data available so far point to sizably larger refining than production disruptions," US bank Goldman Sachs said.

"We roughly estimate that the impact of Harvey on the US oil market would be to increase domestic crude availability by 1.4 million bpd while removing 615,000-785,000 bpd of gasoline and 700,000 of distillate supplies. Larger refinery outages would increase these long crude and short product impacts," Goldman said.

"The shuttering of refining capacity in the Houston area will have a large impact on demand for crude for a while," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

"That will see crude inventories build up in the US," he noted.

The expected US crude buildup on Tuesday widened the US West Texas Intermediate (WTI) crude futures discount to Brent to $5.64 per barrel, its widest in over two years.

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