An oil tank damaged by Hurricane Harvey is seen near Seadrift, Texas, August 26, 2017. - Reuters
SINGAPORE: U.S. gasoline futures hit a two-year high on Monday after Hurricane Harvey pummeled the heart of America's energy industry, while the euro hit a 2-1/2-year peak after the European Central Bank President refrained from talking down the single currency.
Gasoline futures soared as much as 6.8 percent at one point as the storm battered Texas, whose coastal refineries account for a quarter of U.S. crude oil refining capacity. They were 5.9 percent by mid-morning.
Though it has been downgraded to a Tropical Storm, Harvey was still lashing the region on Monday, with some areas expected to see a year's worth of rainfall in the span of a week.
"This is not like anything we have ever seen before," said Bruce Jefferis, chief executive of Aon Energy, a risk consulting practice, adding it was still too early to gauge the full extent of damage to the region's energy infrastructure.
U.S. economic growth was more than halved in the quarter after Hurricane Katrina mauled Louisiana in August, 2005, but quickly bounced back by early 2006 as reconstruction began and gasoline prices moderated.
Harvey has knocked out a quarter of oil production from the Gulf of Mexico, prompting fears it could overturn years of U.S. excess oil capacity and low prices. Some U.S. traders were seeking to import oil product cargoes from North Asia, several refining and shipping sources told Reuters.
"The rain is expected to last through to Wednesday so the disruptions could last for some time yet," said William O'Loughlin, investment analyst at Rivkin Securities in Sydney.
After surging on Friday, crude oil prices were mixed on Monday as markets tried to gauge Harvey's impact on oil production.
Brent futures, the global crude oil benchmark, rose 0.3 percent to $52.54 a barrel, adding to Friday's 0.7 percent increase.
But U.S. crude futures pulled back 0.4 percent to $47.67, paring Friday's 0.9 percent gain.
Despite gains in energy shares across the region, Asia-Pacific stock indexes got off to a subdued start as investors waited to see how much damage the storm had inflicted.
MSCI's broadest index of Asia-Pacific shares outside Japan rose less than 0.1 percent, while Japan's Nikkei slipped 0.1 percent.
Australian shares slid 0.7 percent, and South Korea's KOSPI was down 0.4 percent.
Chinese blue chips rose 1.6 percent, extending this summer's blistering rally to nearly 11 percent, while Hong Kong's Hang Seng added 0.7 percent.
The euro surged after ECB President Mario Draghi, speaking at the U.S. Federal Reserve's annual conference in Jackson Hole, Wyoming, failed to cite the common currency's strength as a concern or discuss monetary policy specifically.
Instead, Draghi said the central bank's ultra-easy monetary policy was working and the euro zone's economic recovery had taken hold.
"The EUR bulls will feed off anything they can get that suggests a less accommodative stance going forward," Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.
The euro rose to as high as $1.19665 early on Monday and was last little changed at $1.1924, holding Friday's 1 percent gain.
The dollar fell 0.2 percent to 109.19 yen, adding to Friday's 0.1 percent slide, after Federal Reserve Chair Janet Yellen, speaking at the same event as Draghi, also failed to address policy, focusing more on financial stability.
Yellen's remarks disappointed some investors who had hoped for hints on the Fed's plans for interest rates.
The dollar index, which tracks the greenback against a basket of other major currencies, fell 0.3 percent to 92.498, its lowest level since January 2015.
"Markets (were) disappointed with the Yellen speech and they sold the dollar and pushed bond yields down," said Imre Speizer, markets strategist at Westpac.
He said Harvey would likely further weigh on the U.S. dollar since it's "a major negative weather event "and "obviously bad for the economy."
The 10-year U.S. Treasury yield was at 2.1729 percent on Monday, from Thursday's 2.194, further undermining the dollar's yield appeal.
But lower bond yields gave Wall Street a slight boost, with the Dow and the S&P 500 both ending about 0.15 percent higher on Friday, although the Nasdaq closed about 0.1 percent lower.
Investors see a 40.7 percent chance of a rate hike by the Fed in December, down from 45.6 percent a month ago, according to the CME FedWatch tool.
Spot gold crept up 0.25 percent to $1,294.66 an ounce, extending Friday's 0.4 percent gain. - Reuters
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