Oil prices rose early on Friday and gasoline futures rallied to a four-month high as Hurricane Harvey makes its way toward Texas and is expected to make landfall at the heart of the Gulf Coast refining industry near Houston later on Friday or early on Saturday.
At 7:51am EDT Friday, WTI was up 0.74 percent at US$47.78 and Brent was up 0.81 percent at US$52.46. The front-month gasoline futures were surging 3.72 percent at US$1.726 and touched a four-month high in intraday trade.
Early on Friday, the National Hurricane Center (NHC) issued a storm surge warning for south Texas, saying that this warning "means there is a danger of life-threatening inundation, from rising water moving inland from the coastline, during the next 36 hours in the indicated locations."
Oil refiners have shut down around 1 million bpd of refining capacity in Texas, Bloomberg reports, citing company statements and people familiar with the events. Oil refineries in Corpus Christi operated by Citgo Petroleum, Valero Energy Corp, and Flint Hills Resources have also started to shut down ahead of the landfall.
Shell, Exxon, and Anadarko have reduced production in the Gulf of Mexico ahead of the storm.
Based on data from operator reports, it is estimated that as of 11:30 CDT on Thursday, 9.56 percent of the current oil production in the Gulf of Mexico has been shut-in, equal to 167,231 bpd. It is also estimated that 14.66 percent of the natural gas production, or 472 million cubic feet per day in the Gulf of Mexico has been shut-in, the Bureau of Safety and Environmental Enforcement (BSEE) said late on Thursday.
About 17 percent of U.S. crude oil output comes from the Gulf of Mexico, or 1.661 million bpd as of May, according to the Energy Information Administration. Related: EIA Spreads Optimism With Double Draw
"The biggest impact of this storm will be a significant reduction of crude oil imports into the Texas Gulf Coast," Andy Lipow at Lipow Oil Associates, a Houston-based consultancy, told the Financial Times, adding that the refinery shutdowns and possible flooding could raise national gasoline prices by 5 to 10 cents a gallon.
The storm damage will dictate if today's price movements would be sustained, Carsten Fritsch at Commerzbank told FT.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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