Energy Prospectus

U.S. Gas Prices Are Down As Oil Industry Rebounds from Harvey. Reuters.
U.S. gasoline prices fell on Monday as the nation's oil heartland continued to claw its way back from the devastation wrought by Storm Harvey, with shipping channels, pipelines and refineries restarting operations. Port operations across the U.S. Gulf Coast oil and gas hub were resuming, although many still had restrictions on vessel draft, according to U.S. Coast Guard updates. Key fuel pipelines planned to restart as more of the oil refineries that feed them ramped up production. Harvey dumped as much as 50 inches (127 cm) of rain over Texas and Louisiana, forcing officials to close or restrict operations at ports from Corpus Christi, Texas, to Lake Charles, Louisiana. It also forced the closure of nearly a quarter of the nation's oil refining capacity. The U.S. Coast Guard on Monday allowed some barge traffic to enter Port Arthur, Texas, home of the country's largest oil refinery, and is considering allowing ships to enter on Tuesday, a spokesman said.


Colonial Pipeline says Line 2 pipeline restarted. Reuters. Colonial Pipeline Co on Monday said it restarted one of its fuel lines shut because of Hurricane Harvey, with another line scheduled to restart on Tuesday. The company said it had restarted “Line 2” between Houston and Lake Charles, Louisiana, as of 3 p.m. EDT (1900 GMT), and remained on schedule to restart the segment covering the same area for “Line 1” on Tuesday. Colonial is the biggest U.S. fuel system, with pipelines that connect refineries along the U.S. Gulf Coast to markets in the Northeast, transporting more than 3 million barrels a day of gasoline, diesel and jet fuel. With more pipelines coming on line, concerns about supply should ease. The storm took down nearly a quarter of U.S. oil refining capacity, affected oil and gas platforms along the Gulf and lifted gasoline prices by more than 20 cents on average.
---------------------------
There will be gasoline shortages in many areas until all the pipelines that deliver refined products are up an running. Getting all of the refineries back up to capacity will take several weeks.

John White at Roth Capital 9/5/2017:

First and foremost, our thoughts and prayers are with those in the Gulf Coast area that may have lost a loved one or are otherwise suffering or displaced. The ROTH E&P research effort is based in Houston so we have seen the devastation firsthand.

As for Hurricane Harvey’s impact on WTI crude oil prices, the consensus opinion is a net bearish, with more demand losses, in the form of refinery outages, than supply losses, in the form of shut-in oil and gas production. As of 8/30/2017, according to IHS, U.S. Gulf of Mexico operators have shut down approximately 324,000 b/d of crude oil output, equal to around 19% of total Gulf of Mexico production. In addition, about 0.61 Bcf/d of natural gas output was shut in, or about 19% of Gulf production. Total crude oil production disruptions are estimated at just below 1.0 million b/d.

Refinery shutdowns continued last week with many Houston area refineries now offline and combined outages estimated at 3.9 million b/d, with another 2.2 million b/d operating at reduced rates, according to IHS and other industry sources. Together, the affected facilities represent over 30% of U.S. refining capacity.

Corpus Christi, despite taking the brunt of Harvey’s initial landfall, is currently faring the best. Flooding was far less severe in Corpus Christi and active recovery has been underway for a couple days. The region’s four refineries, which collectively represent around 4.5% of U.S. distillation capacity, are all looking to begin restart operations this week, as reported by IHS.

The situation is more uncertain in Houston. Five of the city’s nine refineries, representing 7.2% of U.S. distillation capacity, are officially confirmed to be offline. The other four, representing another 6.2% of U.S. distillation capacity, are almost certainly operating at reduced rates, if not completely idled, IHS reported.

Further east, the Beaumont-Port Arthur-Lake Charles refining hub has also been hit with catastrophic flooding. Three of this region’s seven refineries are now officially offline. The other four are reportedly operating at severely reduced rates. As in Houston, there are no reports of significant structural damage so far, IHS informs

Operations in the Houston Ship Channel are slowly coming back with draft size restrictions in place, although salvage efforts to remove a sunken drydock is currently blocking the main stem of the ship channel.