Harvey shuts 24% of refining capacity in US; Brent down

Tammy Harvey
August 31, 2017

In addition to shutting oil refineries, about 1.4 million bpd of USA crude production has been disrupted, equivalent to 15 percent of total output, Goldman Sachs said.

In the refined product market, U.S. gasoline prices increased by 3% at $1.8380 per gallon, the most since 31 July 2015.

Flooding from tropical storm Harvey caused ongoing large-scale United States refinery outages on Tuesday, while crude prices rose on the back of supply disruptions in Colombia and Libya. Brent crude is now at $52.35 a barrel - up 0.42%, while WTI is at $46.63 - up a tad- 0.13%.

At least 3.6 million bpd of refining capacity are offline in Texas and Louisiana, which is almost 20% of total U.S. capacity.

US West Texas Intermediate (WTI) crude futures were at Dollars 46.35 per barrel at 0155 GMT, down 9 cents from their last close. As a result, the discount for U.S. WTI versus Brent surpassed $5 a barrel, its widest in more than two years.

After settlement, sources told Reuters that Motiva Enterprises was shutting down the nation's largest refinery due to flooding.

Crude oil prices continued to lose ground because of the fallout from Tropical Storm Harvey, though prices may be supported by tensions over North Korea. The contract's peak was $1.7888, the highest for NYMEX gasoline since July 2015.

Some refineries were preparing for restarts, but heavy rains were expected to last through Wednesday, adding to catastrophic flooding.

Gains intensified for refined products after sources on Wednesday said Total's Port Arthur, Texas, refinery had been shut by a power outage resulting from the storm. Tropical Storm Harvey, which has been downgraded from a hurricane, hit oil refiners harder than crude producers. Yet crude remains in ample supply.

"Rising US production, domestic refinery blending constraints, and the end of (the) driving season combined to depress WTI", ING bank said.

"We are thus lowering our Brent oil price estimates to $55 per barrel from $60 per barrel in 4Q17 (and) to $57 per barrel from $64 per barrel in 2018", Jefferies bank said.

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