As Harvey Wrecks Havoc, European Refiners Set to Benefit

Texas is home to 5.6 million barrels per day (bpd) of refining capacity, and neighboring Louisiana has 3.3 million bpd. The company said Monday afternoon all inbound and outbound refined products and crude oil transportation services on its pipeline systems in the Houston area are suspended and all operations at its Galena Park and East Houston storage and transportation facilities also are offline.

An oil refinery is seen before the arrival of Hurricane Harvey on August 25, 2017, in Corpus Christi, Texas. Colonial, which moves more than 3 million barrels of fuel per day from the US Gulf Coast to the East Coast, says many lines will be shut down with no projected restart time.

According to a report from AltaCorp Capital in Calgary, mid-continent refining profit margins have jumped by about 20 per cent this week, a development it said will boost the bottom lines of Calgary-based Husky (TSX:HSE) and Cenovus (TSX:CVE).

Harvey made landfall in Texas late on Friday as the most powerful hurricane to hit the region in more than 50 years and caused large-scale flooding, forcing refineries in the area to close. Overall, this makes it more likely that prices will rise in the short term as suppliers of crude to the US Gulf Coast seek new buyers, and buyers of US crude seek new supplies.

The Permian shale basin in Texas is considered one that's more resilient to the type of depressed market that sidelined investments last year and considerable gains are expected this year by the EIA.

But Joel Hanley, senior director for oil pricing at Platts, said the effect was already becoming clear in freight markets, where the "pull on gasoline cargoes from Europe and Asia" has seen deals to charter container ships at higher rates.

Though rains continue to drench Texas and the Gulf coast Tuesday, gasoline and oil futures were stable in premarket trading.

"We might be seeing signs that this reduction in refinery demand might not be as long-lasting as initially thought", said Gene McGillian, market research manager at Tradition Energy in Stamford, Connecticut.

"No doubt, Harvey has impacted operations and access to refineries in the Gulf Coast". Other pipelines in the state were also temporarily idled. More than 100 oil platforms in the Gulf were evacuated, although those platforms will probably come back online much quicker than the onshore refineries.

"That outweighs the outages in crude oil production from the storm".

The damage assessment could lead to more volatility.

After settlement, sources told Reuters that Motiva Enterprises was shutting down the nation's largest refinery due to flooding. Energy companies are still assessing the damage from Harvey.

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