U.S. Oil Industry Update: Still Reeling From Hurricane's Impact
Ellen Wald | Sep 06, 2017 10:05
It has been over a week since Hurricane Harvey made landfall on the Texas Gulf Coast, but the U.S. energy industry is still reeling from its impact.h2 Oil Production/h2
According to the Bureau of Safety and Environmental Enforcement, 9% of oil production in the Gulf of Mexico (approximately 153,000 bpd) and 13% of natural gas production was still offline as late as Tuesday morning.
The Texas Railroad Commission estimated that up to 500,000 bpd of oil reported producing at 50% of its pre-hurricane capacity on 3 September but expected to return to full production by 5 September. Lingering flooding, inaccessible roads, lack of personnel, and access to the chemicals and sand needed for fracking are all concerns that continue to impact oil production in the region.
Some drilling was delayed as a result of Harvey, but only remained offline.
Some refineries, like those owned by Valero (NYSE:VLO) in Corpus Christi and Texas City have sources , however, say Motiva is in the process of restarting its hydrocracker and large crude unit.
Traders should expect the gap between gasoline and crude oil to remain greater than normal but to narrow in the coming weeks. There is also the possibility that gasoline prices may not fully return to their low levels pre-Harvey, even after the recovery is complete.
h2 Transportation/h2The closure of the Colonial Pipeline had the greatest impact on gasoline supplies in the southeastern and mid-Atlantic regions of the United States. Colonial Reports over the weekend anticipated that the gasoline portion would restart on 5 September. The Colonial Pipeline runs from Houston, TX to Linden, NJ with many spurs and offshoots carrying needed products for gasoline, diesel, and jet fuel to states across the region. Gasoline prices will remain elevated for much of the United States at least until the pipeline is fully reopened.
Ports in the region (Corpus Christi, Houston Shipping Channel, and Galveston) began reopening last week. However, access for large ships, like the VLCCs used to transport crude oil, was limited until 4 September. "potentially catastrophic" storm. It's predicted to hit the Caribbean this week and potentially the United States over the weekend. Right now, forecasts expect landfall across Caribbean nations and in Florida, but not in oil producing regions.
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