Harvey’s effects on petroleum pricing and related things

The following information is cribbed (with permission) from a FACTBOX produced by S&P Global Platts. Petroleum companies in the Gulf, especially around Houston, are are responding to likely shutdowns or possible damage due to the strengthening Hurricane, which is expected to have its largest impacts over the next 36 hours or so (longer for some flooding).

Before giving you these details, I also saw this: A map being circulated around energy industry folks showing the amount of land in Houston that has been made impermeable (by construction of things and surfaces) since the last big Hurricane. It is a HUGE amount. It seems that over time, Houston has made the prospect of bad flooding given a certain amount of rain worse rather than better (individual cities can make that choice, they may have failed to choose widely).

OK, her is a selection of facts form the FACTBOX:

* In the afternoon, the NYMEX RBOB crack spread against WTI was $1.91
higher at $17.67/b, boosted by supply concerns. NYMEX September RBOB settled
up 4.52 cents at $1.6641/gal. Physical gasoline prices were higher as well.
S&P Global Platts assessed Gulf Coast conventional gasoline at NYMEX October
RBOB plus 12 cents/gal, a 5.89-cent/gal climb and its highest assessment since
August 13, 2015.

* Platts assessed benchmark Gulf Coast jet fuel on the first day of
trading for Colonial Pipeline’s prompt 50th cycle at the NYMEX October ULSD
futures contract minus 3 cents/gal, after it traded at that level in the
Market on Close assessment process. That was up 4 cents from Wednesday, and
its highest level since October 1, 2014.

* In natural gas, TGP Zone 0 was the largest mover in the region, with
prices jumping almost 6 cents to $2.816/MMBtu. There was a force majeure
issued on Tennessee Gas at 11:30 am CDT time that will impact flows involving
Station 1 and Station 9 near Agua Dulce, Texas. NGPL was evacuating personnel
from Compressor Station 300, and TGP had evacuations at Stations 1 and 9 near
Agua Dulce.

* In shipping, Aframax freight rates rallied with charterers seen working
narrow fixing windows. The east coast Mexico-USGC route climbed 20 Worldscale
points from Wednesday after Chevron took the Bonita for an east coast
Mexico-US Gulf Coast run at w112.5 loading a 70,000 mt cargo with August 27-29
dates. An expectation of potential delays after the hurricane fizzles out and
shipowners heard to be looking for a “hurricane premium” on bookings kept the
market elevated.

Do you know what all that means? Good, let me know in the comments below. I suppose that where pries may be going up, there will be less of an up-going in the event of disaster.

Oil refineries are making some adjustments right now:

* Flint Hills Resources is shutting both the East and West plants of its
296,470 b/d Corpus Christi, Texas, refining complex ahead of Hurricane Harvey,
the company said.

* Other area refiners, such as Valero, Marathon, Phillips 66 and Shell,
said they were monitoring the storm. “We will continue to monitor the storm
and make decisions about refinery operations, especially for our Corpus
Christi and Three Rivers locations where the storm is currently projected to
make landfall,” Valero spokeswoman Lillian Riojas said.

* The Texas Gulf Coast is home to 4.944 million b/d of refining capacity,
while the Louisiana Gulf Coast is home to 3.696 million b/d of capacity,
according to the US Energy Information Administration.

I suppose that is the part where our entire economy is affected by a hurricane in Houston. Since the hurricane is steering south of Houston this may not be as big a deal, with the direct effects of flooding being the real problem. I assume these plants are all designed to handle pretty much any amount of flooding because they were built in a Hurricane zone by non-idiots. Right?

Meanwhile, the actual production of Texas T is being affected already:

* Some 9.56%, or 167,231 b/d, of US Gulf of Mexico oil output was shut-in
due to Hurricane Harvey as of 11:30 am CDT (1630 GMT) Thursday, the US Bureau
of Safety and Environmental Enforcement said. In addition, some 14.66%, or 472
MMcf/d, of Gulf of Mexico natural gas production was shut-in, BSEE said.
Personnel have been evacuated from 39 production platforms, or 5.29%, of the
737 manned platforms in the Gulf of Mexico, the agency said. Personnel have
been evacuated from one of the 10 non-dynamically positioned rigs currently
operating in the Gulf.

* Shell shut operations at its Perdido facility in the Gulf of Mexico
late Wednesday. Shell’s Perdido is one of the world’s deepest floating oil
production platforms, moored at 8,000 feet of water. It is a production hub
for three fields in which Shell has a stake: the Great White, Tobago and
Silvertip fields. Production is about 100,000 b/d.

* ExxonMobil has begun to curtail oil and natural gas production from the
Galveston 209 platform and is preparing the facility for evacuation, a company
spokeswoman said Thursday.

* Anadarko Petroleum has shut production at four fields offshore Texas.
The company said late Wednesday that it had not only removed
all personnel but temporarily shut production at its operated Boomvang,
Nansen, Gunnison and Lucius facilities. Boomvang and Nansen are sited in the
East Breaks area of the Gulf, nearer the Texas coast than the other two
fields, while Gunnison is located in Garden Banks further west and Lucius is
in southeast Keathley Canyon, sited south of Garden Banks.

* ConocoPhillips has evacuated non-essential personnel from its Magnolia
offshore US Gulf of Mexico producing platform, the company said. Magnolia’s
gross production in 2016 was 4,000 boe/d, of which 3,000 boe/d was net to
ConocoPhillips.

* Statoil, which operates two rigs in the Eagle Ford play of South
Texas, said it was securing its rigs and wells and evacuating rig personnel as
well as suspending all non-essential activities.

* ConocoPhillips has suspended drilling and completion activities in the
Eagle Ford Shale and moved non-essential equipment off the six drilling rigs
it is running in the South Texas play.

Seaports and transport terminals are going to shut down or are starting to shut down, and this of course will affect things other than bublin’ crude.

* NuStar Energy is preparing to shut its Corpus Christi crude oil and
refined products terminals in Texas ahead of the storm, spokesman Chris Cho
said Thursday. He did not give a specific timeline for completing the
shut-down process, but said the company has activated its emergency response
plans and will continue to monitor the storm to determine its next course of
action. NuStar’s North Beach Terminal at Corpus Christi in southern Texas
includes a 1.6 million-barrel crude facility, and 10 storage tanks with a
combined capacity of 327,000 barrels for gasoline, distillates, xylene and
toluene.

* Magellan suspended operations early Thursday at its crude terminal and
condensate splitter in Corpus Christi, Texas, in response to the incoming
storm, said spokesman Bruce Heine. The midstream player operates a 3.5
million-barrel crude and condensate storage storage and a 50,000-b/d
condensate splitter at the facility, Heine said in an email. However, the
company’s refined products and crude oil pipelines in the Houston Ship Channel
area are operating normally at this time.

* Port condition Yankee was set for the Texas ports of Houston, Texas
City, Galveston, Freeport and Corpus Christi. Port condition Yankee is when
hurricane force winds are possible within 24 hours, closing inbound traffic.
PIRA Energy Group estimates Texas’ total crude export capacity to be 2.5
million b/d. PIRA, which is part of S&P Global Platts, has arrived at that
data using available public data.

* A source with a shipowner engaged in the US Gulf Coast oil lightering
market confirmed ship-to-ship operations were suspended through the end of the
weekend. “I can confirm that lightering, everywhere from Corpus to Southwest
Pass, is suspended as of today until at least Sunday.”

Thanks very much to the staff at the SPG Global newsdesk, and editor Lisa Miller.

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4 thoughts on “Harvey’s effects on petroleum pricing and related things

  1. I don’t speak the jargon well enough to work out all of that, but the gist is that a substantial fraction of US gasoline refining capacity will be offline for at least a few days due to the hurricane, and depending on damage, some of it could be offline for months. Some natural gas appears to be affected as well: “force majeure” means, “it’s not our fault we couldn’t fulfill our contract with you.”

    Short version: Expect a spike in gasoline prices for the next week or so because we won’t be producing as much of it as usual. And that’s the best case scenario.

  2. It’s god’s punishment on the oil industry and the USA for their pollution of this planet he made for us, that’s what it is.

    Ever wondered why god put the oil under foreigners’ lands? Because he didn’t want anyone to burn it.

  3. More gas usage produces global warming which produces more string hurricanes which shuts down refineries which raises gas prices which reduce global warming.

  4. Nah, god tried raising prices on oil, ever since the 70s. Hasn’t stopped you yet, so he’s going for the direct option: hurricanes. Hes pissed at what you did.

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