Energy Prospectus

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Hurricane Jose is moving closer to the east coast, but does not appear to be any threat to Florida. It may threaten New England.

The next tropical wave could be a problem as it is taking a southern track. Good news for Texas is that Harvey and Katia have cooled the water in the western side of the Gulf of Mexico. That lowers the risk of a hurricane forming.

From Robert Rapier, an EPG member:

The Department of Energy reports that as of September 12, four refineries in the Gulf Coast region remain shut down. These refineries have a combined refining capacity of 734,000 BPD, equal to 4.0% of total U.S. refining capacity.

Five refineries are in the process of restarting after being shut down. These refineries have a combined capacity 1.3 million BPD, equal to 7.1% of total U.S. refining capacity. Production is assumed to be minimal until the restart is completed.

At least six refineries in the Gulf Coast region were operating at reduced rates. These refineries have a combined total capacity of 2.3 million BPD, equal to 12.6% of total U.S. refining capacity.

I warned two weeks ago that we could expect to see substantial gasoline inventory drops in coming weeks. This week the Energy Information Administration reported a gasoline inventory decline of 8.4 million barrels -- the largest week to week decline in gasoline inventories ever recorded.

Goldman Sachs estimates that Hurricanes Harvey and Irma will reduce oil demand by 900,000 BPD this month. Due to its damage to oil infrastructure in Texas, Hurricane Harvey will reduce demand by 600,000 BPD in September while Irma could reduce demand by 300,000 bpd. < Keep in mind that this is lower demand by refiners for crude oil, demand for refined products may have gone higher with the evacuations from Florida and now the people returning. Eventually, the refiners will need to replenish the depleted fuel inventories.

Some oil production remains offline, so the net impact will be a 600,000 BPD increase in inventories in September. Goldman Sachs expects crude oil demand to recover in coming months.