As devastating as Hurricane Harvey was to Texas, reconstruction is now expected to be ultimately positive for U.S. oil demand in a few months as fuel consumption is expected to increase as people rebuild homes, Goldman Sachs said in a report on Tuesday published by Bloomberg.
"The potential for some U.S. onshore production curtailment and the likely demand recovery during the reconstruction suggest that the impact on the balance may become slightly positive after a few months," Goldman analysts said in the report. "Such an outcome would ultimately be supportive of U.S. oil demand," the investment bank noted.
According to Goldman, more than half of the U.S. refining capacity that was shut down before and during Harvey would be back online by Thursday. Dry weather after the hurricane is also expected to reduce losses in gasoline and diesel demand.
Last week, Goldman Sachs estimated that the U.S. oil sector would take months to recover, and expected property damages to be around US$30 billion.
According to the Department of Energy's latest situation report, as of 02:00pm EDT on Monday, September 4, eight refineries-with a combined refining capacity of 2.11 million bpd, equal to 21.8 percent of total Gulf Coast refining capacity and 11.4 percent of total U.S. refining capacity-were still shut down. Another eight refineries-with a combined capacity of 1.78 million bpd, or 9.6 percent of the overall U.S. refining capacity-had begun the process of restarting after being shut down.
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According to Goldman estimates, 2 million bpd of refining capacity would remain offline by Thursday, compared to 4.6 million bpd of peak shut-down capacity. Some 1.4 million bpd could be offline until the middle of this month, the bank has estimated.
However, Goldman said that its prediction for increased fuel demand could be upset if Hurricane Irma makes a landfall in Florida, where it would not be felt so much on the sparse oil infrastructure than on fuel demand. The National Hurricane Center said early on Tuesday that Irma had strengthened into an extremely dangerous Category 5 hurricane, while the DOE said in its post-Harvey update that according to the NWS, there is an increasing chance of seeing some impacts from Irma in the Florida Peninsula and the Florida Keys later this week and weekend.
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