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BP Refinery Outage Could Push Down Oil Prices

BP Refinery Outage Could Push Down Oil Prices

The outlook for Canada’s oil sands is pretty grim, but it just got hit with an unexpected blow.

An outage at a Midwest refinery could lead to deeper discounts for Canadian oil for several months. BP’s Whiting refinery in Indiana was forced offline for unexpected repairs. Without going into too much detail, BP said that it “shut down the largest of its three crude distillation units for unscheduled repair work.” It also said that production has been cut back at the refinery, which has the capacity to process 413,000 barrels per day, or 19 million gallons of refined fuel each day. Related: Chevron’s Mishap Highlights Risk of Deepwater Drilling

The disruption of the Indiana-based Whiting refinery could lead to a spike in gasoline prices in the Midwest as the region suddenly encounters shortages of fuel supplies. Gas prices in Chicago are above $3 per gallon, while the national average is $2.61.

The impacts could reverberate beyond the Midwest. The surprise disruption is bad news for oil prices as well, as a major source of crude demand has suddenly been taken offline. This comes at a time when other refineries will conduct maintenance and switch off summer fuel blends. The end of peak driving season will also cut into fuel demand heading into autumn. Related: Japan’s Nuclear Restart Could Spell Disaster For Commodities Markets

Moreover, without the demand pull of a major refinery, crude oil will have to be rerouted to storage. Much of that could end up being diverted down to Cushing, Oklahoma, a key oil storage hub. For much of 2015, energy analysts have watched U.S. oil storage levels, looking for evidence for when the worldwide glut of supplies could ease. After several months of inventory drawdowns, the shuttering of the Whiting refinery could lead to a reversal, with stocks building back up.

If Whiting remains offline and the oil is sent to Cushing, storage levels at Cushing could fill up in a matter of months. The prospect of such a dramatic development has already pushed down oil prices. Related: Saudi Oil Strategy: Brilliant Or Suicide?

The Whiting refinery also sources a lot of the oil it processes from Canada, and its outage is another blow to Canada’s oil patch, which is already suffering from having to heavily discount its oil compared to WTI. Western Canada Select, a benchmark for heavy Canadian crude, dropped to just $23 per barrel, well below WTI’s $43. As the FT notes, at those levels, some of Canada’s oil companies are barely breaking even, while others are even losing money on the oil they are producing.

By Charles Kennedy of Oilprice.com

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Leave a comment
  • Brett Miller on August 13 2015 said:
    Gee, why don't they just use the Keystone XL to send it down to the gulf refineries? Oh, I forgot.
  • Vince on August 13 2015 said:
    All this talk of a shortage seems a little premature. We have not had a shortage in supply since the 70's. It's just an excuse to price gouge the Midwest again. Just as prices start to fall we have to shut the refinery down for unscheduled repairs. This seems like a scam we have labor day coming,college students returning to school and millions of people traveling thru the Midwest to get to there destination. Just another way for BP to make money on the little people. By creating the shortage that doesn't exist.
  • kw on August 14 2015 said:
    This is too fishy. British Petroleum, a foreign owned corporation, has track record of predatory behavior in the USA. This seems like nothing more then a ploy by BP, to increase the profits of British investors and pensioners, while enabling BP to buy oil at a lower price for future use, then they would have been able to without this "accident". Congress, or the Midwest States, NEED, to pass a windfall tax on the BP refinery, so they do not profit excessively from this "accident".

    P.S to the Keystone Pipeline people:

    The Keystone Pipeline is for export to Europe. It send's the oil from "Canada" to, aw heck, who am I kidding. Study history if you doubt me, but it will go down like this. Once the Keystone pipeline is built, they will say they are shipping the more costly tar sand oil through it, when in reality they will be shipping the cheaper Dakota oil to Houston for export to Europe, and dumping the tar sand oil on Midwest refineries.

    Or heck, the British could go all out, and do to America, what it's British East India Company(think BP of yesteryear) did to India. What the British did to India was, go into India's grain markets, and manipulate the local and regional wheat prices, so the people of India could not afford to buy the wheat they themselves grown.

    I believe tens, if not a hundred, million people where killed in India because of famine, due to that business "strategy". So, it stands to reason, with our media and politicians being bought and paid for by the British(look it up), just like in old India during the day's of the British East India Company, they will jack the price of oil products through the rough(5$-$10 a gallon), so American's can't afford to buy it. They will probably achieve this, by ordering their agent Banker, the Rothschild's, to have the Federal Reserve hyper-inflate the dollar through excessive QE like we never seen(they will use the National debt they created to justify this savagery as the excuse/pretext).

    That will enable them to buy oil products ridiculously cheap, then turn around and tax the living heck out of it, to prop up their economy. That is what the Keystone Pipeline is really about. My fellow American's, when dealing with sharks like the UK, you need to know their history. This is how they operate, and have operated. The UK is not our friend, and they secretly hate us, because we made them give up their Empire. The UK, wants to destroy the USA, carve us up to hand out as party favors to raise their profile among other nations, and restore their Empire.

    I know it is hard to believe, but once you do the research, it is all there. All the domino's are lined up but the Keystone Pipeline. That is why Obama is stalling, he wants to wait till his term is up, or his forces are ready for the collapse such an event will cause in America. That is why they are trying to give the West away to the Chinese, South West to Mexico, South central perhaps an independent black nation, and the East under British rule again. Using feminism and pedophiles, they destroyed the credibility of their elected government. Not just of the UK, but of Australia and new Zealand as well. From a pure psychological perspective, the citizens of those nations, when you factor in the forced immigration, are ripe for a semi-Messianic type ruler, in the form of a King William.
  • Jayendra Desai on August 19 2015 said:
    This is nothing but pure price gouging! I have never seen such irresponsibility in refinery operation even in third world countries like India, Pakistan or underdeveloped. The politicians are silent! The BP Management is laughing on the loot! A refinery pushes prices by more than 25%?

    Another form of TERRORISM!

    LIONS ARE FED, VULCHERS ARE WATCHING!

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