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Harvey threatens more USA oil refineries after heavy rains

01 September 2017

Officials said the refinery, which hasn't been shutdown by the historic flooding, requested the release of emergency oil.

Fearing a gasoline supply crunch, USA gasoline prices RBc1 rose to a more than two year high of US$1.84 per gallon early on Wednesday.

According to Bloomberg, oil traders booked 20 tankers from European suppliers since August 26, double the average for August.

Southwest Texas, which has been hit the hardest is home to large USA refineries that operates on WTI crude. While infrastructure restarts following the storm are expected to extend into the coming weeks, on Wednesday Marathon Petroleum Corp was restarting its Galveston Bay Refinery, said sources familiar with plant operations. "As long as this is the case flows will continue and crack spreads look well supported".

Other emissions were released during the planned shutdown of the refinery before the arrival of Harvey, which was then a hurricane but later downgraded to a tropical storm.

"Crude oil prices are lower because of how much refining capacity (demand for crude oil) is offline due to the storm".

At least two East Coast refineries have already run out of gasoline for immediate delivery as they scrambled to fill barges for markets normally supplied by the Gulf Coast, two refinery sources said. The same goes for European refiners. The outage at the 362,000 bpd facility would add to the region's woes. So European exports won't be heading there.

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AltaCorp analyst Nick Lupick said Canadian refinery product pricing is up slightly "but nothing compared to what we have seen in the U.S". Explorer shut two main lines carrying fuel to the Chicago market Tuesday, and the main Colonial Pipeline to the US East Coast was running at reduced rates. Such a spike in prices isn't forever.

When the USA can't produce enough gasoline or diesel to meet export demands, other regions are forced to look for replacement supplies "and the backfill has to come from further away", said Richard Joswick, an analyst with S&P Global Platts.

The refinery outages could rise as the hurricane swings towards Louisiana.

The problem for Mexico is compounded by the fact that production from state-owned Pemex has been in decline for years, making the country much more dependent on its northern neighbor. It has not commented since Harvey on whether it would release fuel specifically from the gasoline reserve.

According to industry estimates, at least 4.4 million barrels per day (bpd) of refining capacity was offline, or nearly a quarter of total US capacity.

Though the USA retail average gasoline price hit $2.40 per gallon on August 28 - the second-lowest price on the Monday before Labor Day since 2004 - and while Monday's price was up 4 cents per gallon over the previous week, that foes not does yet reflect the impact of refinery shut downs due to Hurricane Harvey.

Harvey threatens more USA oil refineries after heavy rains