NEW YORK: Monster storm Harvey slammed into a key US oil-producing region disrupting output amid the devastation, but crude stocks are high enough that the impact on the industry should be short-lived, experts said Monday.
The Texas coast, home to nearly one-third of the US oil refining capacity, has been ravaged by the most powerful hurricane to hit the state since 1961.
As a precautionary measure, 105 of the 737 offshore oil rigs in the Gulf of Mexico were evacuated before the storm made landfall on Friday, according to the Bureau of Safety and Environmental Enforcement (BSEE).
The Gulf of Mexico alone accounts for 20% of US production, and the BSEE said Sunday nearly 22% of the region’s output has been shut down.
About 25% of natural gas production also has been suspended.
US weather services downgraded Harvey to a tropical storm on Saturday but torrential rains have continued to drown the area and are expected to continue for most of the week. Peak flooding is not expected until Wednesday or Thursday, jeopardising the reopening of refineries.
US oil giant ExxonMobil, one of the largest in the world, Sunday announced it was shuttering its Baytown complex. The company did not immediately respond to requests for comment Monday on the impact of this closure on its output.
”Information on the extent of the damages incurred by the oil and gas infrastructure remains limited at this point,” said a Goldman Sachs analyst report. “Nonetheless, data available so far point to sizeably larger refining than production disruptions.”
The analysts estimated that about three million barrels a day of refinery capacity was offline as of Sunday, or 16.5% of the total US capacity.
”At this stage, most of the refining outages are reported as preventive, with only a few comments on minor flooding,” the report said.
James Williams of WTRG Economics cautions that additional refinery shutdowns could occur in the coming days, and that could mean a bigger hit to oil production.
Short-term shortages
The impact on crude production is lower than the refinery impact, with about a million barrels per day offline, or about 11% of total US output, according to Goldman Sachs.
”The flooding currently taking place is however leading to a greater loss of onshore supply (from the Eagle Ford) than historically has been the case,” the analysts said.
And although US oil stocks are at a high level, Williams cautioned that “there may be some short- term shortages of gasoline and diesel.”
While most refineries will be able to resume operations a week or two after the rains end, “some may delay restarting and perform their fall maintenance a few weeks early.”
The BSEE warned that once the storm has passed, the facilities must be inspected before they can restart operations.
The US Chemical Safety Board (CSB) issued a warning Monday urging petroleum and petrochemical refineries to exercise extreme caution when restarting their operations, a delicate process that could take longer than expected.
All these uncertainties pushed gasoline futures prices up 3% from Friday’s close, to US$1.7799, its highest level since June 2015. - AFP
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