Harvey drives up gas prices

Tammy Harvey
September 3, 2017

Diesel futures rose 0.3% to $1.7468 a gallon.

At the same time, US condensate shipments from the Gulf Coast have been curtailed by the closure of lines belonging to Explorer Pipeline, reducing supplies of the material that oil-sands producers use to dilute their bitumen so it can flow through pipelines. The rate of bookings is about double the average for August.

The gulf coast plays an outsized role in keeping the nation's cars going.

Harvey, now a tropical storm, has brought torrential rain and the collapse of levees, dams and drains.

More than 45% of the nation's petroleum refining capacity is located along the Gulf Coast, as well as 51% of US natural-gas, processing plant capacity, according to the EIA. Blue flames represent natural gas processing plants. That would have been a 14 percent increase, taking USA output to a level not seen since the 1970s.

Crude tankers from as far away as China and Korea continue to queue in the Gulf, waiting to fill with US crude.

Numerous tankers booked for cross-Atlantic voyages have multiple options for where to take their cargoes. And because another hurricane is heading to U.S. shores.

A survey of shipbrokers showed they anticipated 30 cargoes being booked to load over the next two weeks.

The U.S. Gulf Coast, as one of the world's largest petrochemical markets, is a primary supplier of petrochemical feedstocks and products to countries like China, Korea, Taiwan and many other developing countries.

Both Ingham and Lipow predicted that gasoline prices will stabilize once the emergency passes because of the ample supply of crude. On a seasonal basis, they're the highest ever. They are now 14.5 percent below the record levels hit in March. That's at a time when the outright price of crude itself is still trading at less than half of where it was in mid-2014. LaDoucer says the jump in price is greatest in eastern and southern states that get gasoline from the Gulf where refineries and pipelines are shut down. "However, a clear understanding of overall damage at the refineries is unknown", said Jeanette Casselano, AAA spokesperson.

Motiva's massive Port Arthur refinery, the No. 1 refinery in the USA that is controlled by Saudi Aramco, began a controlled shutdown early Wednesday due to "increasing local flood conditions".

Marathon Petroleum Corp's Galveston Bay Refinery in Texas City, Texas, had raised production to 45 percent of its 459,000 barrel per day capacity, sources told Reuters on Friday.

"The effect of Hurricane Harvey has been devastating on the USA", said Sukrit Vijayakar, an analyst with energy consultancy Trifecta. "It remains too early to know how long these issues will remain".

Louisiana had become the last exit and entry point into refinery row on the U.S. Gulf Coast.

This would mean restricting heavy grade supplies to refiners in Asia and Europe, but boosting the supply of lighter grades priced against Brent in order to narrow the premium to WTI.

A disruption in supply in USA exports has the potential to affect almost every industry in the world's fastest-growing demand centers, from the auto industry to textiles to food transportation to medical devices.

Other reports by Ligue1talk

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