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Harvey: Why oil prices are falling, not spiking

31 Août 2017

U.S. West Texas Intermediate (WTI) crude futures CLc1 were down $1.64 or 3.4 percent to 46.23 at 12:36 p.m. EDT (1636 GMT) Brent crude futures LCOc1 were down 68 cents or 1.3 percent at $51.73 per barrel. Brent crude futures were down 7 cents, at United States dollars 51.93 per barrel.

The United States has 141 oil refineries as of January 1, with a total capacity of 18.6 million bpd, according to the Energy Information Administration.

Harvey has battered the U.S. Gulf coast since last Friday, ripping through Texas, Louisiana and the heart of the U.S. petroleum industry. At the same time, a gasoline supply squeeze triggered a jump in gasoline prices. Refinery shutdowns and fuel shortage worries have also boosted retail fuel prices, particularly in the USA and Southwest.

At least 3.6 million barrels per day of refining capacity are offline in Texas and Louisiana, or almost 20 percent of total USA capacity, based on company reports and Reuters estimates.

Refinery use is liable to decline sharply over the next two weeks which will have an important impact in limiting crude demand and there is liable to very erratic oil data during the next month.

Driven by shale, the USA pumped 9.2 million barrels of oil per day in May.

The EIA reported that USA crude oil refinery inputs averaged over 17.7 million barrels per day during the past week, 264,000 barrels per day more than the previous week's average, according to the EIA.

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Hurricane Harvey took direct aim at the country's Gulf Coast energy machine. Philadelphia Energy Solutions, the region's largest refiner, said it had sold all its available regular gasoline barrels because of increased demand, while Monroe Energy's refinery had increased runs.

Exxon, Shell and other companies have reported to Texas regulators that some of their storage tanks and other facilities near Houston were damaged by the torrential rains and flooding.

The damage assessment could lead to more volatility. 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.

Crude markets were also eyeing disruptions in Libya and Colombia.

Harvey could be the worst storm in USA history in terms of financial cost. Ports in Houston and Corpus Christi are closed, so there's less oil to refine.

"While no two natural disasters are similar, the precedent of Rita-Katrina would suggests that 10 percent of the ... now offline capacity could remain unavailable for several months", the bank said.

Harvey: Why oil prices are falling, not spiking