London: Storm Harvey on Monday roiled oil industry along with the U.S. Gulf Coast over the weekend, as it entered Houston and its port, knocking out numerous refineries as well as some crude production.
The massive flooding caused by the storm forced refineries in the area to close, resulting in the gasoline prices to hit the graph for two years. In turn, U.S. crude futures fell as the refinery shutdowns could reduce demand for American crude, mentions Fox Business.
Harvey is considered the most powerful hurricane to hit Texas in more than 50 years, killing at least two people, causing large-scale flooding.
The U.S. National Hurricane Center said Harvey was moving away from the coast but was expected to stay close to the shore through Tuesday, and that floods would spread from Texas eastward to Louisiana.
Texas is home to 5.6 million barrels per day (bpd) of refining capacity, and Louisiana has 3.3 million bpd. Over 2 million bpd of refining capacity was estimated to be offline as a result of the storm.
Spot prices for U.S. gasoline futures surged 7 percent to a peak of $1.7799 per gallon, the highest level since late July 2015, before easing to $1.7352 by 0948 GMT.
Also Read: Storm Harvey spark chaos in Houston, More rain to come
U.S. traders were seeking oil product cargoes from North Asia, several refining and shipping sources told Reuters, with transatlantic exports of motor fuel out of Europe expected to surge.
“Global refining margins are going to stay very strong,” said Olivier Jakob, managing director of Petromatrix.
“If (U.S.) refineries shut down for more than a week, Asia will need to run at a higher level, because there’s no spare capacity in Europe.”
About 22%, or 379,000 bpd, of Gulf production, was inert due to the storm, the U.S. Bureau of Safety and Environmental Enforcement said. There may also be around 300,000 bpd of onshore U.S. production shut in, trading sources said.
Brent futures eased, but losses were capped as pipeline blockades in Libya slashed the OPEC country’s production by nearly 400,000 barrels per day.