Gas prices set to spike as Harvey pummels Houston

Exxon shuts giant refinery as Harvey hits Texas energy hub

Drivers could see a "mini-spike" in prices as a result of Harvey, said Tom Kloza, Oil Price Information Service global petroleum analyst.

Hurricane Harvey, a category four hurricane, hit Texas coastlines hard this weekend.

The Gulf Coast is responsible for about 45 percent of the US refining abilities.

Texas is home to 5.6 million bpd of refining capacity, and Louisiana has 3.3 million bpd.

The Gulf Coast is an integral supplier of our nation's gasoline, so hurricanes often affect production. That in turn caused the benchmark price of West Texas Intermediate crude to fall as the refinery shutdowns could reduce demand for American crude. Combined, these refineries normally produce upwards of 2 million barrels of oil per day.

"We've had really quiet market action, so it's easy to get frustrated", Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle, which oversees $142 billion of assets, said by telephone.

As a precautionary measure, 105 of the 737 offshore oil rigs in the Gulf of Mexico were evacuated before the storm made landfall on Friday, according to the Bureau of Safety and Environmental Enforcement (BSEE).

The price moves pushed the WTI discount versus Brent to as much as $5.24 per barrel, the widest in two years.

Goldman Sachs analysts say gasoline and distillate product refining margins are likely to rise further in the wake of Tropical Storm Harvey, which is expected to drop more than 50 inches of rain in parts of Texas throughout the week.

The Gulf of Mexico alone accounts for 20 percent of U.S. production, and the BSEE said about 19 percent of the region's output remained shut down, slightly less than on Sunday.

Crude markets were also looking at disruptions in Libya and Colombia.

"Fears of a supply crunch are sending prices charging higher", Smith said.

It added that the storm's impact would "linger for several more weeks".

Gas prices in New Jersey have held steady at an average price of $2.35 a gallon for regular as of Monday, according to GasBuddy.com, but that could change depending on how much damage Harvey inflicts.

In fuel markets, the net-long position on the benchmark US gasoline contract declined 7.5%, while the net-long position on diesel plunged 38%.

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