"We need that Gulf Coast": Harvey flooding shuts down oil refineries

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

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

According to GasBuddy, the national average US gas price Thursday morning was $2.46/gal, up 4.6 percent from its average price a week ago. The contract for October delivery, which ended trading on Thursday, closed up $1.52, or 2.99 percent, at $52.38 a barrel. About 1.4 million barrels of extra oil that "won't be refined to fuels will be sent to storage as long as refineries are shut-in".

That artery can carry 3 million barrels of gasoline and other products daily.

By comparison, last year, consumers paid an average of just $2.22 a gallon across the country to fill up their tanks before heading out on Labor Day sojourns.

The Phillips 66 refinery in Lake Charles, Louisiana, will receive crude from the strategic reserve as part of an agreement requiring the company to replace the oil once supplies are flowing again.

U.S. gasoline futures hit a new a two-year high on Thursday (31 August), after Storm Harvey made a second landfall over the Louisiana coastline resulting in the closure of America's largest refinery and another key regional pipeline.

Fuel prices could continue to tick up this month until refinery capacity is restored. The global benchmark traded at a premium of $4.78 to November WTI.

While most auto owners are feeling the strain at the pump, others are saying it's nowhere near as bad as previous years thanks to their fuel efficient vehicles.

"We still expect production growth to resume, however Harvey probably pushed it out a couple of months or maybe even a quarter", said analysts at Stifel. "You do have some signs of rebalancing, regardless of Harvey", he said.

"What we're seeing is a ripple effect", said Tom Kloza, global head of energy analysis for research firm Oil Price Information Service, in Wall, New Jersey.

Energy Secretary Rick Perry and President Trump have made a decision to put hundreds of thousands of gallons of petroleum into the US oil supply. A barrel of the fuel costs $18.27 more than crude, a record for the time of year.

At the same time, the amount of crude entered into refineries reached a record high of 17.73 million bpd, the data showed, a number that is expected to have dropped dramatically this week due to infrastructure closures.

Right now U.S. shale crude won't be leaving the U.S. Gulf Coast, meaning buyers will have to seek short-term alternatives, such as buying light grades from West Africa or Southeast Asia.

Others saw potential for operational refineries to delay typical September seasonal maintenance to benefit from high prices. On Friday, as two refineries began to restart and some ports reopened, gasoline futures fell 2 percent and the crack spread RBc1-CLc1 fell more than 5 percent.

Analysts said crude's downside was limited by a Reuters poll showing output from the Organization of the Petroleum Exporting Countries likely fell by 170,000 bpd in August from a 2017 high. "But by the end of September, I expect the situation to be nearly back to normal", said Frank Schallenberger, head of commodity research at LBBW.

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