The healing from Harvey has begun for energy markets as half of the refineries shuttered due to the storm are in some stage of the re-start process, and both Colonial and Explorer pipelines are re-opening parts of their system in the Houston area. Gasoline prices are down sharply this morning as the industry breathes a sigh of relief over fuel supplies, though it may still be several weeks before stocks are replenished in many markets fed by the gulf coast plants. Oil prices are moving higher meanwhile as the buyers of crude are coming back online and the ports they rely on are returning to service.
While Corpus Christi plants, and several around Houston are ramping back up, most of the Pt. Arthur area refineries remain offline accounting for nearly 10% of total US capacity. Early reports suggest it will be several weeks before those plants can clear the flood waters and make the repairs necessary to return to full production.
One hurdle that still needs to be cleared downstream is how shippers will handle the co-mingled gasoline grades shipped up the Colonial pipeline. While widespread waivers allow for winter-grade gasoline across much of the US several weeks early, pipeline rules governed by the FERC are creating a bottleneck that will need to be sorted out this week.
Hurricane Irma has grown to a category 5 storm this morning, the most powerful storm in the Atlantic in the past 7 years. Forecasts have this system pointed towards Florida, which has already declared a state of emergency. This storm is a major threat to the people in its path, but is not nearly the threat that Harvey was to energy infrastructure. There are currently no refineries or major pipeline systems in the storm’s forecasted path. While Florida will likely see fuel shortages as consumers race to fill up, the key – if the storm does not shift further west into the gulf – will be how the ports can weather the storm since the entire state is supplied by boat.
In an unfortunate reminder that refineries are dangerous even if they’re not in hurricane-prone areas, the HollyFrontier refinery in El Dorado Kansas suffered an explosion yesterday that critically injured an employee. It’s too soon to say what impact that had on operations.
Baker Hughes reported no change in the number of active oil rigs drilling last week, although the count was reported to be potentially distorted by Harvey, since several south Texas oil plays could not be reached.