Energy Dept. Taps Into Oil Reserves as Gas Prices Rise Nationwide

Randolph Lopez
September 1, 2017

Oil prices have fallen marginally, while gasoline prices have risen to their highest since mid-2015 due to extensive flooding following storm Harvey that forced a quarter of refineries in the USA to stop production. Between five and 15 inches of rain was expected in south-central Louisiana, the National Hurricane Center said on Tuesday. The Gulf accounts for just 15 percent of US oil production, compared with almost 30 percent a decade ago, according to RBC Capital Markets. Restarting plants under even the best conditions can take a week or more.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at US$46.35 per barrel at 0155 GMT, down 9 cents from their last close.

LS Gasoil for September delivery is up 0.206 at $485.25, yet futures for crude oil have fallen.

The loss of US refining capacity should be bearish for heavy crude grades, given numerous refineries now idled used imports of this type for feedstock.

Chicago-area prices are also set to jump because some Gulf Coast refiners send much of their gasoline to the Midwest.

So why hasn't Harvey led to higher oil prices like it has with gasoline prices?

"The current disruptions are affecting both demand and supply, making it hard to assess the impact on balances at this point", wrote analysts at JBC Energy.

Valero Energy Corp. shut the large crude distillation unit and the gasoline-producing fluidic catalytic cracking unit at its 335,000-bpd Port Arthur, Texas, refinery.

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But gasoline prices are relatively cheap compared to levels earlier this decade, and the end of the peak summer driving season could prevent a further dramatic rise unless there is long-term damage at major refineries.

In Colombia, a bomb attack by leftist ELN rebel group has halted pumping operations along the country's second-largest oil pipeline, the 210,000 bpd Cano-Limon Covenas, sources from the military and state oil company Ecopetrol said.

Hurricane Harvey, which brought record flooding to the USA oil heartland of Texas and killed at least 35 people, has paralyzed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

Exxon has shut its 362,300-bpd Beaumont refinery in east Texas because of high water in the plant, said sources familiar with the plant.

Citgo's 425,0000-bpd Lake Charles, Louisiana, refinery has reduced production because of crude oil shipping disruptions, Energy News Today reported on Monday. Bears are battering WTI as crude oil remain landlocked in the United States as Houston port has remained closed.

Meanwhile, the storm has hurt demand for oil products.

US gasoline prices surged anew in morning trade after the Colonial Pipeline Co, which operates the biggest USA fuel transport system, said it would shut its main lines to the Northeast amid outages at pumping points and lack of supply from refiners.

Compounding matters is the possible closing of the Houston Ship Channel, a prime artery for crude supplies, for an extended period of time.

Other reports by GlobalViralNews

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