Hurricane Joaquin Seen Menacing U.S. East Coast Refineries

  • Threats to refineries near N.Y. Harbor can impact prices
  • Sandy in 2012 was last hurricane to batter U.S. East Coast

Energy traders are keeping an eye on Hurricane Joaquin because of the threat it poses to refineries along the U.S. East Coast.

The hurricane is seen passing off the New Jersey coast on Tuesday, according to the National Hurricane Center. There are three refineries in the state and another three nearby in the Philadelphia area and Delaware. East Coast production, distribution and demand was disrupted by Hurricane Sandy in October 2012.

Hurricane Joaquin heading toward U.S. East Coast refineries

"Hurricanes are bullish," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. "Whenever a hurricane forms, concern is usually focused on the Gulf of Mexico and the production and refining concentrated in the region, but the Mid-Atlantic region is another major refining center and is a significant source of gasoline to New York Harbor where futures are delivered."

The hurricane’s top winds were 130 miles (210 kilometers) an hour and it was 70 miles south of San Salvador, Bahamas, at 2 p.m. New York time, the National Hurricane Center said in an advisory. The official track shifted away from the U.S. mainland overnight; however, a strike on the East Coast as early as Sunday is still possible.

Potential Impact

"You can expect evacuation-related fuel demand, hoarding and of course there’s a major impact if any refineries are knocked offline," Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston, said by phone.

West Texas Intermediate oil for November delivery fell 35 cents, or 0.8 percent, to close at $44.74 a barrel on the New York Mercantile Exchange, after earlier rising as much as 4.5 percent. November gasoline futures were little changed at about $1.3668 a gallon.

"You would expect that reduced demand from refineries would lower crude prices, but usually the rise in gasoline and diesel prices is more than enough to pull crude higher," Kilduff said.

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