Hurricane Harvey is rocking gasoline prices and distillate prices. The market is viewing this as mainly a refining event. Yet with the nature of this storm changing and the possibility it will be a slow mover, it could spark not only refining issues but production levels as well. Not only could a slow-moving storm shut down offshore production, heavy flooding could impact on shore production as well.
Some shale fields are prone to flooding and are current shut-in in prep for Harvey. Industry sources say that it may take perhaps 2 months for some fields to come back on line if flooding is as bad as expected. Many shale fields in the Eagle Ford shale will flood and we may even see some impact in the Permian basin as well. Pipelines and are going to have production disruptions from this storm and terminals will be shut.
As I told WBBM radio I expect a spike in gasoline pump prices 15 to 25 cents a gallon. U.S. gasoline prices have risen almost 10 percent since Wednesday to a high of $1.74 a gallon, their highest since April as refiners shut down in preparation for the storm according to Reuters data. RBOB futures rose 7.65 cents a gallon before pulling back. The impact from the storm is also impacting cotton, rice, soybeans, bio-fuels. This storm should not be underestimated.
Wholesalers are jacking up product prices as that scramble to find supply to get ahead of refinery shutdowns. While we will see demand destruction after the storm we will see a surge as people try to get out of Dodge. The Port of Corpus Christi in Texas has been shut down and increased its hurricane readiness to “Port Condition One”, the release said. Condition One means the port is officially closed for vessels to sail in and out of, said Patricia Cardenas, a PCCA spokeswoman. Power outages will weaken power demand but production shut-ins should offset it. Rains across the Gulf Coast shut down almost all oil imports into the Gulf of Mexico and ships will go out to sea to avoid the storm. We will see many more shut downs and evacuations throughout the day. This is what we know now but is subject to change and when you are reading this, it already has. Call be for updates and stay tuned to Fox Business for updates.
