West Coast refineries are expected to ship barrels into the western side of Mexico in coming days and weeks, temporarily replacing an emerging market for Gulf Coast refiners, the shipping source said.
Gasoline prices hit a 2-year high this week – September deliveries rose nearly 12 cents in one day – and it is likely that prices will continue to be volatile while the full extent of the damage is being assessed.
Oil prices should face further pressure in the coming weeks because US crude stocks are likely increase, according to analysts at Commerzbank. It is a small release of crude for a country that uses almost 20 million barrels of petroleum products daily.
The storm caused the closure of many oil refineries, which analysts said would lead to bigger crude stockpiles and push down prices.
The reduction in refining capacity should see more crude going into storage just as the U.S. driving season comes to an end.
The U.S. Energy Department announced the emergency release of 500,000 barrels of oil from the Strategic Petroleum Reserve that will be delivered to a refinery in Louisiana to help boost gasoline supplies.
Concerns over fuel shortages ahead of the U.S. Labor Day extended weekend were also mounting.
The backlog in unexported refined products will be a challenge to Texas Gulf Coast refiners, according to Sandy Fielden, an analyst at Morningstar.
US gasoline futures RBc1 were up 6.4 percent at $1.8966 a gallon, having hit $1.9022, the highest since July 2015.
Retail gasoline prices have started to rise, too, with the average gallon of gasoline rising $0.01 overnight to $2.38 nationally.
Texas supplies 5.6 million bpd of crude refining capacity, while Louisiana is home to 3.3 million bpd.
Soaring oil production in North Dakota and West Texas has made the USA less reliant on oil rigs in the Gulf, which are vulnerable to hurricanes.
European and Asian traders have diverted millions of barrels of fuel to the Americas. But supplies from distant markets may not arrive soon enough to avert a crunch. On December 10, 2016 was a meeting of oil producers outside the OPEC.
The U.S. dollar dropped to its lowest in roughly 16 months against a basket of major currencies and a more than 2-1/2-year low against the euro, following comments from central bankers on Friday and worries over the storm hurting the U.S. economy.
USA benchmark Treasury yields fell to two-month lows after strong demand for a five-year note auction and as market participants waited on US economic data that will culminate on Friday with the August employment report.
Suppliers in Chicago were trying to secure supplies after the Explorer Pipeline, which typically carries about 350,000 barrels a day (bpd) to the region, shut down.
While flooding is the primary problem for refineries in Harvey’s aftermath, it’s not the only one.
“The potential to have long-lasting economic impact is real”, Perry said. The Texas attorney general is reporting that some stations in Texas are charging as much as $20 per gallon.
The effects of Hurricane Harvey are already showing up in USA gas prices.
Warren Patterson, a commodities strategist at ING Bank, said that following Hurricane Rita in 2005, it “took up to two months for refinery run-rates in the U.S.to recover back to levels prior to the storm”.