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Tropical storm Harvey paralyses a fifth of US fuel output

The US Gulf Coast is home to nearly half of America’s refining capacity.

world Updated: Aug 30, 2017 15:54 IST
Tropical storm Harvey,US oil refining,Texas
An oil tank damaged by Hurricane Harvey near Seadrift, Texas on August 26, 2017.(Reuters)

Flooding from tropical storm Harvey has shut nearly a fifth of US oil refining capacity, triggering worries about a gasoline supply crunch as the slow-moving tempest lumbers through the heart of America’s petrochemicals industry.

At least 3.6 million barrels per day of refining capacity are offline in Texas and Louisiana, or nearly 20% of total US capacity, based on company reports and Reuters estimates. Restarting plants even under the best conditions can take a week or more.

As a result of the outages, major pipelines carrying gasoline, diesel and jet fuel started to adjust deliveries or close lines outright because of a lack of supply. US gasoline futures surged 4% to settle at their highest in more than two years.

The US Gulf Coast is home to nearly half of America’s refining capacity, with some 5.6 million bpd of capacity in Texas and 3.3 million bpd in Louisiana.

More refinery closures were expected, as parts of Texas have received more than 1.2 metres of rain. Fuel prices were expected to keep rising as refining capacity remains down and pipelines run short. Explorer Pipeline, which runs from Texas to Chicago, will shut two lines early on Wednesday.

“These closures are already impacting markets, with crude prices lower on a perceived drop in demand and gasoline prices spiking in response to lower supply,” said Sandy Fielden, director of oil and products research at Morningstar.

Colonial Pipeline, the key artery sending gasoline up the East Coast, was still shipping barrels there but had faced flooding at origination points in Texas.

The US northeast was already dealing with reduced supply. 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.

“Harvey will raise product prices nationwide, denting demand, especially in September,” said Barclays analysts in a note on Tuesday.

First Published: Aug 30, 2017 15:54 IST