The Gulf Coast is the heart of U.S. oil refining, with most of the country’s refining capacity. According to Wells Fargo, about 25% of Gulf Coast refining capacity has been forced to shut down and will remain so for at least most of the rest of the week.
A note from Reuters released Sunday stated that the storm has forced about 22% of U.S. GOM oil production and 26% of gas production offline. The Bureau of Safety and Environmental Enforcement reported today that 98 platforms have been evacuated, and half of the drilling rigs in the gulf are evacuated.
In addition, many companies have shut down production and suspended drilling operations in the Eagle Ford, further decreasing output.
Hurricane Ike in 2008 caused 18 million barrels of oil production to be lost, mostly offshore. My SWAG is that Harvey will more than double that amount AND cause a lot more imports of oil to be delayed. This may have a SIGNIFICANT IMPACT on the new few oil storage reports; no much on the one coming out tomorrow because that is for the week ending 8/25 which is the day Harvey made landfall on the Texas coast.
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From EnerCom: SunTrust compares and contrasts the storm with the last hurricane to hit the Texas coast, Hurricane Ike in 2008. Ike caused oil prices to spike about 33% in one week, but gasoline prices were relatively unaffected. That storm resulted in the temporary loss of a total of 18 million barrels of oil output. The Gulf represented a larger proportion of total oil production in 2008, 25%, compared to 17% today.
However the Eagle Ford, which represents 17% of current production, is also in the path of the storm as was previously noted. SunTrust suggests that while the GOM shutdowns alone are not likely to significantly impact oil production, the GOM plus Eagle Ford could have material impacts.
SunTrust believes that like in 2008, Hurricane Harvey will cause increases in both oil and gasoline prices, but smaller increases in oil and larger increases in gasoline.
Harvey's impact on the oil market
Harvey's impact on the oil market
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Harvey's impact on the oil market
From the Financial Post
CALGARY – Canadian oil producers and consumers are set to be lashed by the powerful storm that has battered Houston and the wider Gulf Coast region, a key oil and natural gas refining and processing hub.
Harvey, the hurricane that hit the United States over the weekend, has so far poured 42 trillion litres of water on Houston and the deluge has forced residents from their homes, flooded large areas of the city and knocked out 2.2 million barrels per day, or 24 per cent of the region’s refining capacity.
Calgary-based Encana Corp., which produces 77,000 barrels of oil per day in the U.S., primarily from the Eagle Ford and Permian shale formations in Texas, said it had been affected by the storm, but declined to say how much of the production was offline.
“We continue to restore production and are working with our midstream providers,” Encana Corp. spokesperson Jay Averill said in an email. “Our staff are safe and our assets were not damaged.”
Canadian pipeline companies Enbridge Inc. and TransCanada Corp. said they had shut their offices in Houston. TransCanada spokesperson Matthew John said the company is assessing “the extent and duration of this historic flood” and the company’s oil and natural gas pipelines are safe.
Precision Drilling Corp.’s investor relations manager Ashley Connolly said her company had 300 employees in Houston, in addition to a corporate office, technology centre and other facilities. All were closed Monday, but undamaged.
Baytex Energy Corp., which produced an average of 21,000 barrels of oil per day from the Eagle Ford in Texas in the second quarter, did not respond to a request for comment. Baytex shares were down 4.23 per cent, Precision was off by 2 per cent, and Encana was 1.5 per cent lower, underperforming the S&P TSX Capped Energy Index, which fell 0.90 per cent on Monday.
Even though most Canadian crude oil production is shipped to refineries in the U.S. Midwest, there has so far been a modest impact of $1 per barrel on Western Canadian Select, the domestic heavy crude benchmark, according to Calgary-based GMP FirstEnergy economist Martin King.
King said the discount for WCS relative to U.S. benchmark Western Texas Intermediate prices could increase depending on the length of the refinery outage in Houston. For the moment, however, he expects most Canadian barrels en route to the Gulf Coast to be stored in the Midwest, where there is available storage capacity.
IHS Markit’s director of oilsands dialogue Kevin Birn said the storm’s impact on Canadian producers depends on how long the refineries are offline. “Refiners will work hard to come up, but longer they are down, as a major demand center for Canadian heavy, differentials to offshore crudes could widen,” Birn said.
The storm has already been quick to hit Canadian pockets, with wholesale gasoline prices shooting up four cents since the middle of last week on average across Canada, according to GasBuddy senior petroleum analyst Dan McTeague. Wholesale gas prices could rise another 2 cents on Wednesday, he warned, though retail prices can vary.
“There are economic reverberations beyond the pumps,” he said, noting diesel and jet fuel prices across Canada would also rise.
The storm’s forced shut down of refineries on the Gulf Coast, the largest refining hub in the U.S., is already affecting the supply of gasoline in North America and also hurting the demand for crude oil. Spot prices for U.S. gasoline futures rose 7 per cent to a peak of $1.77 per gallon, the highest since late July 2015, before easing to $1.70, up 2.5 per cent.
“Refineries that are shut in or sidelined can’t take delivery of oil,” McTeague said, adding, “it’s no wonder that crude has dropped.”
Morgan Stanley analyst Benny Wong said in a research note the outages currently affect 12 per cent of the total refining capacity in the U.S. but there is a risk of more outages and potential flood damage.
In addition to knocking refineries offline, the storm – classified as a category 4 hurricane over the weekend but downgraded to a tropical storm on Monday – is also affecting oil production in Texas’ important shale oil formations.
“Harvey is the first hurricane to materially impact the heart of U.S. energy production, refining and infrastructure in almost a decade,” RBC Capital Markets analysts wrote in a Monday note, adding that one-month gasoline contracts “have surged 25 per cent since last Wednesday’s close en route to multi-year highs.”
Wong said 39 offshore Gulf Coast platforms are also currently shut in, affecting 150,000 bpd, and activity has “likely slowed to stopped in the Eagle Ford shale, which represents 1.4 million bpd of production.”
West Texas Intermediate benchmark oil prices were down 3 per cent or US$1.56 to US$46.31 per barrel Monday as the storm continued to wallop Houston and analysts feared could also affect refineries in Louisiana.
CALGARY – Canadian oil producers and consumers are set to be lashed by the powerful storm that has battered Houston and the wider Gulf Coast region, a key oil and natural gas refining and processing hub.
Harvey, the hurricane that hit the United States over the weekend, has so far poured 42 trillion litres of water on Houston and the deluge has forced residents from their homes, flooded large areas of the city and knocked out 2.2 million barrels per day, or 24 per cent of the region’s refining capacity.
Calgary-based Encana Corp., which produces 77,000 barrels of oil per day in the U.S., primarily from the Eagle Ford and Permian shale formations in Texas, said it had been affected by the storm, but declined to say how much of the production was offline.
“We continue to restore production and are working with our midstream providers,” Encana Corp. spokesperson Jay Averill said in an email. “Our staff are safe and our assets were not damaged.”
Canadian pipeline companies Enbridge Inc. and TransCanada Corp. said they had shut their offices in Houston. TransCanada spokesperson Matthew John said the company is assessing “the extent and duration of this historic flood” and the company’s oil and natural gas pipelines are safe.
Precision Drilling Corp.’s investor relations manager Ashley Connolly said her company had 300 employees in Houston, in addition to a corporate office, technology centre and other facilities. All were closed Monday, but undamaged.
Baytex Energy Corp., which produced an average of 21,000 barrels of oil per day from the Eagle Ford in Texas in the second quarter, did not respond to a request for comment. Baytex shares were down 4.23 per cent, Precision was off by 2 per cent, and Encana was 1.5 per cent lower, underperforming the S&P TSX Capped Energy Index, which fell 0.90 per cent on Monday.
Even though most Canadian crude oil production is shipped to refineries in the U.S. Midwest, there has so far been a modest impact of $1 per barrel on Western Canadian Select, the domestic heavy crude benchmark, according to Calgary-based GMP FirstEnergy economist Martin King.
King said the discount for WCS relative to U.S. benchmark Western Texas Intermediate prices could increase depending on the length of the refinery outage in Houston. For the moment, however, he expects most Canadian barrels en route to the Gulf Coast to be stored in the Midwest, where there is available storage capacity.
IHS Markit’s director of oilsands dialogue Kevin Birn said the storm’s impact on Canadian producers depends on how long the refineries are offline. “Refiners will work hard to come up, but longer they are down, as a major demand center for Canadian heavy, differentials to offshore crudes could widen,” Birn said.
The storm has already been quick to hit Canadian pockets, with wholesale gasoline prices shooting up four cents since the middle of last week on average across Canada, according to GasBuddy senior petroleum analyst Dan McTeague. Wholesale gas prices could rise another 2 cents on Wednesday, he warned, though retail prices can vary.
“There are economic reverberations beyond the pumps,” he said, noting diesel and jet fuel prices across Canada would also rise.
The storm’s forced shut down of refineries on the Gulf Coast, the largest refining hub in the U.S., is already affecting the supply of gasoline in North America and also hurting the demand for crude oil. Spot prices for U.S. gasoline futures rose 7 per cent to a peak of $1.77 per gallon, the highest since late July 2015, before easing to $1.70, up 2.5 per cent.
“Refineries that are shut in or sidelined can’t take delivery of oil,” McTeague said, adding, “it’s no wonder that crude has dropped.”
Morgan Stanley analyst Benny Wong said in a research note the outages currently affect 12 per cent of the total refining capacity in the U.S. but there is a risk of more outages and potential flood damage.
In addition to knocking refineries offline, the storm – classified as a category 4 hurricane over the weekend but downgraded to a tropical storm on Monday – is also affecting oil production in Texas’ important shale oil formations.
“Harvey is the first hurricane to materially impact the heart of U.S. energy production, refining and infrastructure in almost a decade,” RBC Capital Markets analysts wrote in a Monday note, adding that one-month gasoline contracts “have surged 25 per cent since last Wednesday’s close en route to multi-year highs.”
Wong said 39 offshore Gulf Coast platforms are also currently shut in, affecting 150,000 bpd, and activity has “likely slowed to stopped in the Eagle Ford shale, which represents 1.4 million bpd of production.”
West Texas Intermediate benchmark oil prices were down 3 per cent or US$1.56 to US$46.31 per barrel Monday as the storm continued to wallop Houston and analysts feared could also affect refineries in Louisiana.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Harvey's impact on the oil market
Oil production curtailed. An estimated 20 percent of the Gulf of Mexico’s offshore oil production was sidelined from the storm, or roughly 400,000 bpd. The outages offshore aren’t expected to last very long.
Corpus Christi port closed. An oil drilling ship sank in the port of Corpus Christi, blocking the ship channel. The drill ship, owned by Paragon Offshore, could delay reopening of the port. Corpus Christi has grown in importance recently because the volume of crude oil exports leaving the U.S has exited through the city’s port.
Refining outages could get worse. ExxonMobil may begin shutting down its Beaumont, TX refinery today, a facility with a capacity of 362,000 bpd, due to rising waters. It also plans on shutting down a 240,000-bpd crude distillation unit. Motiva Enterprises will make a decision on Tuesday on whether or not to shut down its refinery in Port Arthur, TX, the nation’s largest oil refinery. The facility has a capacity of 603,000 bpd, but Reuters reports that high water and problems obtaining crude oil are affecting operations. At the time of this writing, no word has come from Motiva. The outages of these two refineries would seriously exacerbate the growing gasoline shortage.
Corpus Christi port closed. An oil drilling ship sank in the port of Corpus Christi, blocking the ship channel. The drill ship, owned by Paragon Offshore, could delay reopening of the port. Corpus Christi has grown in importance recently because the volume of crude oil exports leaving the U.S has exited through the city’s port.
Refining outages could get worse. ExxonMobil may begin shutting down its Beaumont, TX refinery today, a facility with a capacity of 362,000 bpd, due to rising waters. It also plans on shutting down a 240,000-bpd crude distillation unit. Motiva Enterprises will make a decision on Tuesday on whether or not to shut down its refinery in Port Arthur, TX, the nation’s largest oil refinery. The facility has a capacity of 603,000 bpd, but Reuters reports that high water and problems obtaining crude oil are affecting operations. At the time of this writing, no word has come from Motiva. The outages of these two refineries would seriously exacerbate the growing gasoline shortage.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group