Gasoline futures spiked on Wednesday as refiners and other members of the field-to-pump supply chain began to report damages caused by Hurricane Harvey, according to a report by Reuters. Crude oil futures fell by 2.5 percent the same day, as demand for the raw resources fell due to infrastructural failures.
Gasoline spot prices had spiked 6.19 percent on Wednesday by 4:00pm EST, trading at $1.8936.
Extensive flooding caused the administration of the Motiva Port Arthur refinery, the country's largest, to consider temporarily shutting down the facility.
"This flooding issue could be a persistent issue with the staff unable to repopulate the facilities," John Kilduff of the New York-based energy hedge fund Again Capital, said. "Gasoline inventories could decline rapidly if we get an extended shutdown.
Hurricane Harvey is the strongest hurricane to hit Texas in over 50 years. Even after being downgraded to a tropical storm over the weekend, the system dumped over 50 inches of rain over Houston, drowning the fourth-largest city of the United States.
ExxonMobil shut down its Baytown refinery, the second largest in the United States with a capacity of 560,500 bpd. Royal Dutch Shell closed its 360,000 bpd Deer Park refinery, according to S&P Global Platts, and Phillips 66 shut down its 247,000 bpd Sweeny refinery.
All port facilities in Houston and Corpus Christi were also shut down on Monday, not open to vessel traffic. That means that no refined products or crude oil will be either imported or exported for the time being.
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"Any hiccup in U.S. refined product exports is highly disruptive to the supply chain given the dependency of nations like Mexico and other Latin American countries on the U.S.," Michael Tran, director of global energy strategy at RBC Capital Markets, told Reuters.
Harvey also impacted offshore oil production. S&P Global Platts says that an estimated 378,633 bpd of oil output was knocked offline as of August 27, or about a fifth of the total production in the Gulf of Mexico, while a quarter of the region's natural gas output was also sidelined.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More