Oil prices down as United States reels from Harvey

WTI Crude Oil

WTI Crude Oil

The prices in spot markets for gasoline in the Gulf have soared above benchmark prices in New York Harbor, according to Reuters data.

On Thursday, U.S. gasoline hit a two-year high above $2 a gallon.

"The temporary closure of refineries is a major dent to United States' crude demand and is weighing on both Brent and WTI prices", BMI Research said.

The good news in that report was that despite Texas being the bull's eye for Harvey, the state is still among those with the lowest average price at the pump. As a result, gasoline and crude oil prices have been headed in opposite directions.

"Retailers can either go out of business or pass their costs along", said Tom Kloza, director of global energy analysis at the Oil Price Information Service.

Gas prices increases are not expected to be as severe as they could be or as they were after hurricane Katrina when prices increased 80 cents per gallon. The Gulf Coast also exported 2.7 mb/d of refined products in May, much of which was sent to Latin America and Europe.

The devastation from Tropical Storm Harvey along the Gulf Coast is starting to have a ripple effect on gasoline prices across the country.

The closure marks the latest in a series of outages at Texas Gulf Coast refineries that have led to a nationwide spike in gasoline prices.

Brent Crude
Daily November Brent Crude

This widened the crack spread, the difference between the prices of USA gasoline and crude oil.

More than 18 percent of oil production in the Gulf of Mexico was shut down, the U.S. Department of the Interior's Bureau of Safety Environmental Enforcement said.

Harvey was forecast to come ashore in western Louisiana near the Texas border on Wednesday.

Last week, EIA said output climbed to 9.53 million barrels per day, nearing the record high of 9.61 million reached in June 2015. Earlier this week, Barclays estimated that Harvey knocked out roughly 500,000 barrels per day of crude oil production, well short of impact is had on refining.

The U.S. president can call for an emergency drawdown from the SPR if the country is confronted with an economically threatening supply disruption. On Wednesday, Exxon announced the shutdown of its Beaumont, Texas refinery as well due to "operational issues" caused by Harvey. US condensate accounts for about a third of the diluent that Canadian oil sands producers use, Birn said. The Colonial pipeline, which transports huge amounts of fuel from the gulf coast to NY, was out of service in the Texas refining hubs of Houston and Port Arthur.

The SPR, established in the early 1970s after the Arab oil embargo caused panics over fuel supply, now contains 679 million barrels of oil.

However, the extreme flooding could prevent some refinery workers from being able to return to work.

Slipping production after a major storm is not unprecedented: US output slipped after Hurricane Dennis in 1999, Hurricane Ivan in 2004 and Hurricane Katrina in 2005, forcing a range of industry and government reactions. "So many people across the city have experienced it". "It's devastating to have your home flooded and deal with that emotional trauma".

Job growth slumps in August, unemployment holds steady
The growth missed expectations, as analysts had expected the economists would report approximately 200,000 new jobs in August. In August, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $22.12.

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