Hurricane Harvey that has struck Texas is causing serious damage to the nation’s oil refining capacity and is set to impact national and global consumers of refined products like gasoline, pushing up prices as ports in the Gulf of Mexico close. Demand for U.S. crude could also take a hit and crude futures have already fallen.
Reuters reports that gasoline futures climbed to their highest level in more than two years with a 7% rise early today. Flooding from the storm has wiped out 11% of U.S. refining capacity, as a quarter of oil production in the country comes from the Gulf of Mexico. Ports that deliver products to Latin America and Asia remained closed Monday. According to the U.S. Bureau of Safety and Environmental Enforcement, approximately 22% of Gulf production was shut down Sunday afternoon.
Damages are estimated to require days to weeks to complete, as rains continue to cause damage to oil, gas, pipeline and chemical plants west of Houston, media reports estimate. Meanwhile, the U.S. government has yet to say whether it will release reserves of refined gas from the country’s Strategic Petroleum Reserve.
U.S. traders have been searching for oil product cargoes from North Asia, which is expected to provide more product if U.S. refineries stay closed for more than a week, Reuters reports.
– Nicholas Stern, managing editor