US petrol prices spike to two-year highs after Harvey disrupts supplies from Texas
Retail US petrol prices surged to two-year highs on Friday and global shipping routes were scrambled, even as some of the nation’s oil refineries began restarting in the wake of Hurricane Harvey.
Major fuel pipelines feeding the US Northeast and Midwest were shut or severely curtailed, prompting shortages and dramatic spikes in wholesale cash prices that pushed the national retail average to US$2.519 a gallon, the highest since August 2015.
Harvey, which raked across the Texas Gulf coast a week ago, has roiled global fuel markets. Tankers carrying millions of barrels of fuel have been re-routed to the Americas to avert shortages. European refining margins hit a two-year high amid the surge in exports.
Effects of the storm will continue for weeks, if not months, after record rains and flooding in Houston and the US energy hub. It knocked out about 4.4 million barrels of daily refining capacity, slightly more than Japan uses daily, and only some restarts have begun so far.
On Friday, the US Energy Secretary approved an additional release of crude oil from the Strategic Petroleum Reserve, adding 3.5 million barrels on top of the 1 million barrels approved as of Thursday.
The Explorer Pipeline, which hauls fuel from the US Gulf coast to the Midwest region, said it aimed to restart its main lines this weekend as refineries indicated they would be able to resume supplies.
Marathon Petroleum Corp’s Galveston Bay Refinery in Texas City, Texas, had raised production to 45 per cent of its 459,000 bpd capacity, sources told Reuters.
In Corpus Christi, where Harvey first made landfall, Citgo Petroleum Corp said it was beginning to restart its 157,500-barrel-per-day (bpd) refinery, while Flint Hills Resources and Valero Energy Corp were also moving to restart their plants, sources said.
European and Asian traders have diverted millions of barrels of fuel to the Americas. That included a rare opportunity for exports of jet fuel from Europe to the United States, reversing the usual flow of shipments.
Supplies from distant markets may not arrive soon enough to avert a crunch after the Colonial Pipeline, the biggest US fuel system, said it would shut part of its main lines to the Northeast.
“We are going to have outages from Texas to Boston,” said one East Coast market source. The market is “way under-appreciating the magnitude of this.”
Several East Coast refineries have run out of petrol for immediate delivery as they sent fuel elsewhere, and concerns over shortages ahead of the US Labour Day extended weekend were mounting.
The global impact of the storm was being felt in Venezuela, where financially strapped state-run PDVSA is facing the possibility that scheduled deliveries, tankers floating offshore for weeks due to non-payment, will make their way to other Latin American destinations.
At least two cargoes expected to deliver to Venezuela currently in the port of Curacao are now expected to be delivered to Ecuador.
Mexico, Brazil, Colombia and other countries want to tap some of the 7 million barrels of fuel sitting in the Caribbean Sea, according to three traders and shippers.
Benchmark US petrol futures had surged more than 15 per cent since the storm began.
“Yesterday, the anxiety over Harvey reached a crescendo,” said John Kilduff, partner at energy hedge fund Again Capital LLC, adding that with the restarts, “you can see the light at the end of the tunnel.”