Gasoline jumps on Harvey disruption

Gasoline jumps on Harvey disruption

Gasoline jumps on Harvey disruption

The storm caused the closure of refineries in the United States oil-producing heartland, which traders fear will lead to bigger crude stockpiles and push down prices. The loss of refineries around Port Arthur, Texas, would leave only Louisiana refineries supplying fuel to NY and other demand centers.

The massive rainfall has restricted ship traffic in ports across the Texas Gulf Coast from Corpus Christi to the Sabine Pass, with further restrictions likely in Louisiana as the storm crawls east. Bloomberg News reported 14 tankers were in a logjam waiting to deliver crude oil.

With that, gasoline futures headed higher for a third straight day. Gasoline for October delivery RBc1 was down 0.6 percent at $1.7684.

Retail prices climbed, too, up 2 cents on Wednesday and 7 cents in the past week, to a national average price of $2.42 per gallon, according to Gasbuddy.

Analysts said prices would seesaw until there the market got a clearer outlook for the refinery industry. The key pipeline was knocked offline because there isn't enough gasoline flowing for it to operate.

About 13.5 percent of oil production in the Gulf of Mexico was shut in on Thursday due to Tropical Storm Harvey, the U.S. Department of the Interior's Bureau of Safety and Environmental Enforcement said. The record-setting storm barreled through the production chain that makes it possible for drivers all over the country to fuel up, from offshore oil platforms to gasoline pipelines.

Thus, the remaining oil refining capacity in the US fell to a minimum level in seven years, according to experts. "It has to come from Asia even".

This has caused prices of both benchmarks to fluctuate higher and lower.

But prices rallied in the oil products markets, with U.S. gasoline futures hitting a two-year high above $2 a gallon, buoyed by fears of a fuel shortage just days ahead of the Labor Day weekend that typically sees a surge in driving. On Friday, as two refineries began to restart and some ports reopened, gasoline futures RBc1 fell 2 percent and the crack spread RBc1-CLc1 fell more than 5 percent.

Analysts at Goldman Sachs and Stifel said infrastructure outages could last several months, although it was hard to estimate the exact damage.

The Port of Houston has no timeline for reopening, while Corpus Christi's port is expected to resume normal operations by September 4. Some refineries were preparing for restarts, but heavy rains are expected to last through Wednesday, adding to catastrophic flooding in Houston.

Pipelines delivering crude from the Permian basin, the largest U.S. shale field, to refineries in Texas have also been closed since the weekend.

Other sectors are also slowly emerging from Harvey's mess.

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