Gasoline Gains, Crude Drops as Storm Harvey Poised for Comeback

  • 2.35 million barrels a day of crude, condensate capacity shut
  • Motiva Port Arthur, largest U.S. refinery, at reduced rates

Re-Energized Harvey Turns Wrath Once More on Texas

Gasoline prices moved to a two-year high while crude slipped as traders braced for more cutbacks at Gulf Coast refineries with Tropical Storm Harvey set for a second landfall near the Texas-Louisiana border.

Motor fuel prices rose 4.2 percent in New York, while WTI traded at the lowest level in five weeks. After shifting over the Gulf of Mexico late Monday, Harvey is now expected to regain strength before crashing ashore Wednesday near Port Arthur, Texas, where Motiva Enterprises LLC operates the largest U.S. refinery. The plant is currently said to be shutting.

“Port Arthur seems to be in the cross-hairs,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said in a telephone interview. While people were optimistic overnight, “that sense of optimism is starting to go down the tubes.”

Oil has declined 7.4 percent this month as investors weigh signs of rising global output against production cuts by some members of the Organization of Petroleum Exporting Countries. 

Harvey, meanwhile, has curbed crude demand with about 2.35 million barrels a day of crude and condensate capacity falling offline. Valero Energy Corp.’s Port Arthur plant is also said to have shut two process units due to flooding and Exxon Mobil Corp.’s Beaumont, Texas refinery is said in the process of shutting due to the flooding.

Concerns remain over the duration of the storm and how long these refinery outages will last, Rob Thummel, managing director and portfolio manager at Tortoise Capital Advisors LLC, which manages $16 billion in energy-related assets, said by telephone.

For a report on the effects of shale production, click here

Futures were little changed from the settlement after the industry-funded American Petroleum Institute was said to report U.S. crude supplies fell by 5.78 million barrels last week. West Texas Intermediate crude for October delivery traded at $46.42 a barrel at 4:39 p.m. after settling at $46.44 on the New York Mercantile Exchange. Brent rose 11 cents to end the session at $52 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $5.56 to WTI.

Gasoline for September delivery rose 7.1 cents to $1.7833 a gallon. The gasoline crack spread, a rough measure of the profit from refining crude into gasoline, climbed to $20.84 a barrel.

See also: Full U.S. Gas Tanks May Ease Risk of Fuel Shortages From Harvey

Corpus Christi, Texas, plants close to where Harvey originally hit landfall as a Level 4 Hurricane are now preparing for restart. Flint Hills Resources LLC plans to restart its Corpus Christi West refinery, while Valero and Citgo Petroleum Corp. were also said to be prepping their refineries in the area for restart.

Oil-market news:

  • U.S. crude stockpiles probably declined by 1.75 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report on Wednesday.
  • The mutual dependency of pipeline companies and refiners is being magnified as Tropical Storm Harvey takes its toll on the Gulf Coast, putting at risk the U.S. shale boom.
  • Saudi Aramco may raise October Arab Light crude prices by 35 cents a barrels for sales to Asia, according to a median estimate in Bloomberg survey of six refiners and traders.

— With assistance by Perry Williams, Ben Sharples, and Rakteem Katakey

    Before it's here, it's on the Bloomberg Terminal.