Oil Slumps as Harvey Heads Toward Refineries on Texas Gulf CoastBy
Hurricane Harvey leading to multiple energy platform closures
Gasoline futures surge as refineries shut, reduce rates
Hurricane Harvey sent oil tumbling and gasoline margins soaring as it approaches the refining hub on the Gulf Coast of Texas.
Harvey has forced workers off some energy platforms in the Gulf of Mexico, closed marine terminals and threatens to flood refineries in Houston and Corpus Christi.
With the storm “you have much less oil demand” amid the likelihood of refinery shutdowns, Kyle Cooper, director of research with IAF Advisors in Houston, said by telephone. “There is a very serious risk of flooding.”
The hurricane is intensifying an oil rout driven by concerns over rising output from producers such as the U.S. and Libya as the Organization of Petroleum Exporting Countries and its allies struggle to drain a global glut. Futures in New York are down by more than 5 percent this month.
West Texas Intermediate for October delivery declined 98 cents to settle at $47.43 a barrel on the New York Mercantile Exchange. Total volume traded was about 7 percent above the 100-day average.
Brent for October settlement slid 53 cents to end the session at $52.04 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $4.61 to WTI, the widest in two years.
With WTI so much cheaper than Brent, demand for U.S. crude exports may rise, said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida.
“With refiners being possibly shuttered in the Gulf Coast for the storm, prompt crude in the U.S. should have diminished value,” he said. “With the spread that wide, it creates a short-lived situation in that it really fosters exports from the U.S.”
As Harvey approaches, refiner Flint Hills Resources LLC will shut down all operational units at its West Plant and East Plant in the area, and LyondellBasell Industries NV’s Houston refinery is said to be running at reduced rates ahead of the hurricane.
Royal Dutch Shell Plc shut production at its Perdido platform in the Gulf of Mexico and evacuated the facility. Anadarko Petroleum Corp. shut in production and also evacuated personnel at several oil and gas production platforms, and Exxon Mobil Corp. also closed platforms. Meanwhile, Magellan Midstream Partners LP suspended operations at its Corpus Christi marine terminal and condensate splitter.
Gasoline crack spreads, which measure profits from refining crude into motor fuel, surged. The margin based on U.S. benchmarks jumped 12 percent to $17.59 a barrel for the largest gain since February.
The spreads are climbing on the assumption “that you’ll have enough loss of refinery output with a day or two shutdown,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone.
- Shell says almost all of the Pernis refinery units in Rotterdam are back in use following last month’s fire.
- The latest U.S. government data showed crude production at the highest level since July 2015, even as crude stockpiles turned lower for an eighth straight week.
- OPEC’s Joint Ministerial Monitoring Committee, which oversees implementation of the cuts, plans to invite Nigeria and Libya to gatherings in Vienna next month.
— With assistance by Stephen Stapczynski, Ben Sharples, Grant Smith, and Sophie Caronello