Traders fear the move powerful storm in the direction of Louisiana.
On Monday, gasoline prices rose sharply due to the suspension of refinery operations due to tropical storm Harvey. Traders are trying to assess the damage in the vicinity of Houston, preparing for a potential shortage of supply of gasoline. Harvey struck Texas on Friday in the status of hurricane of the fourth category (the strongest in this state for half a century), and then weakened to a tropical storm. But on Monday, the disaster has resulted in strong flooding in Houston and nearby settlements. Traders fear that now the storm might be headed towards Louisiana, where harm-producing fuel of the enterprise, the recovery of which could take weeks or even months.
Due to flooding the day before work was halted refineries that make up about 15% of all refining capacity of the United States. And the number of closed factories increased. Exxon Mobil Corp. reported a decrease in downloads of its refinery in beaumont (Texas), whose power is 362 300 barrels per day. Estimated energy investment Bank in Houston, the cumulative reduction processing capacity can reach 30% if Harvey will move in the direction of Louisiana. “So many questions hung in the air,” says Tariq Zahir, an investment Manager at Tyche Capital Advisors, which is the background of sharp price movements began trading oil from the beginning of the Asian session on Monday.
Volatility in energy markets rose on Thursday, when the status of Harvey was upgraded to a hurricane, and traders immediately began to assess the consequences of the disaster. The weekend storm intensified, causing a nervous trade has added increased uncertainty regarding damage from the storm. “I called the clients and asked what to do, says mark Waggoner, President of Excel Futures. – This morning I had not one minute to spare. I don’t even remember when the last time was so busy.”
The way Harvey runs through the heart of the oil infrastructure of America. Only on the coast of Texas holds about 30% of refining capacity in the country. Yesterday, Exxon Mobil reported damage to floating roof tank refinery in BAYTOWN. It is the second largest refinery in the country. If the enterprise will suffer even more extensive damage and will need new equipment as well as other spare parts for repairing the damages from flooding, the period of downtime can be very long.
“The market will trade from one news to another, says mark Stands, head trading division at INTL FCStone. – Closes or even more businesses? Will they be closed for a longer period? Or Vice versa, will be back sooner than expected? How long will it take vessels maneuvering in the Houston ship channel”? Even veterans of the energy industry, which already has seen in his lifetime storms, Harvey has led to confusion. “I am looking for an even stronger definition than “unprecedented”, said Kloza from Oil Price Information Service.
The expert notes that wholesale gasoline prices are rising by 5-10 cents a gallon across the South-East and other markets, which are supplied refineries in the Gulf of Mexico. Ultimately all this will result in higher prices for consumers at gas stations. The reduction in refining capacity could also weaken demand for crude oil in the United States. Today since morning futures for WTI fell by 0.23% to $ 46.71 per barrel. Brent crude oil fell by 0.37% to $51.42.
Harvey as of last Sunday, the volume of production on the Gulf coast fell by 22%, also forcing them to reduce production producers in the southern Texas shale field in Eagle Ford. But the impact of the storm on demand is still expected to be more significant. “We lost not only production, but also processing capacity, said John Saucer, an expert consulting firm Mobius Risk Group. Goldman Sachs analysts predict that the storm will increase the amount of the proposed U.S. oil 1/4 million barrels a day and reduced the demand for fuel will occur over several months.
Because America has become a larger exporter of oil and fuel outages refinery can affect the energy markets in other countries, analysts warn. The countries of Latin America, dependent on American gasoline or distillates would be forced to seek alternative sources of fuel purchases, whereas Europe can keep our eye on the middle East, where to buy distillates to offset the decline in U.S. exports. “As a result of these events may occur even a real change in the world gasoline market,” says John Kilduff, partner investing in energy hedge Fund Again Capital.
Meanwhile, traders have started to adjust their shipments to increase the supply of gasoline in the United States. “We have heard that some Asian refineries are trying to send gasoline to the United States, in addition to the traditional European supplies, says Ehsan Ul-Naga, Director of energy consulting company Resource Economist Ltd. – I believe in a couple of weeks America will be required deliveries of gasoline around the world.”