U.S. taps crude from strategic reserves to cope with Hurricane Harvey

Harvey has taken 25 percent of oil and natural gas production offline

Oil dips as US floods cause large-scale refinery shutdowns (FP)

Without the 600,000 b/d of gasoline exports from the U.S. Gulf Coast, the entire Atlantic basin will be competing for a smaller pool of supply, increasing prices at the pump from NY to Buenos Aires. "This impact is starting in Texas, where the average price for unleaded gas has already jumped up two cents since Tuesday (Aug. 22) to $2.15/gallon".

Dan Flynn, energy analyst at Price Futures Group in Chicago, said gasoline prices nationally should begin to slip back down by mid-September.

High production pressured crude oil (USO) (UCO) prices.

"Retailers can either go out of business or pass their costs along", said Tom Kloza, director of global energy analysis at the Oil Price Information Service.

The increase is far less than what happened over a decade ago with Hurricane Katrina, he says, when national prices spiked by 40 to 50 cents a gallon. Prices are likely to rise even more in the Gulf Coast.

We're just experiencing the ripple effect from Harvey's disruption of the USA gasoline market.

USA crude and product stocks, typically watched closely by oil investors because they reflect market balancing, were largely ignored this week.

About 19 percent of oil refining capacity on the Gulf Coast is offline. The refinery interruptions have worsened as Harvey moved east on Wednesday, slamming into the Louisiana coast near the Texas border. The refinery, located near the Texas-Louisiana border and 80 some miles east of Houston, produces 603,000 barrels-per-day.

In other words, Harvey has disrupted about one-fifth of the country's total refining capability.

Analysts polled by S&P Global Platts expect the EIA to report a decline of 1.5 million barrels in crude inventories, along with declines of 1.9 million barrels for gasoline and 600,000 barrels for distillate supplies. Total SA's refinery in Port Arthur is out with a power loss, a person familiar with that plant said.

Concerns over fuel shortages ahead of the U.S. Labor Day extended weekend were also mounting.

The effects of the shutdowns will reverberate well outside of Texas. US condensate accounts for about a third of the diluent that Canadian oil sands producers use, Birn said.

So drivers in cities such as Philadelphia, Charleston, and Miami: prepare for higher gas prices, if not disruptions in gas supplies.

The International Energy Agency, which co-ordinates releases of government-held fuel stocks in the event of major disruptions, said it believed the United States had plentiful petrol and diesel inventories to ride out current supply issues. "The good news for consumers is that it seems some of the units are in the process of getting back in operation".

However, the extreme flooding could prevent some refinery workers from being able to return to work.

Ed Hirs, an energy finance professor at the University of Houston, predicted that "this interruption may help Bakken producers as they ship more crude to the Pennsylvania and New Jersey refiners, and it will throw a temporary lifeline to the refiners in Pennsylvania and New Jersey".

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