How Long Can U.S. Refineries Remain Offline?
When Hurricane Harvey blew into Texas last weekend, it dumped more than 30 inches of rain, flooding Houston and large areas of southeastern Texas, while leaving thousands homeless or without power. The worst storm to hit the U.S. since 2004 and by some estimates the largest rain-storm in U.S. history, Harvey has had a profound impact on the nation’s largest oil-producing and oil-refining region.
Refinery shutdowns, pipeline closures and other consequences of Harvey has sent the Gulf oil industry into a tailspin while throwing oil markets into disarray. The question facing industry analysts, investors and consumes is how long this chaos will last.
The storm forced several major Gulf refineries to shut their doors and limit operation. ExxonMobil and Total shut down facilities in the Port Arthur and Beaumont areas, while Valero, Marathon and Citgo were forced to reduce operations in refineries from Corpus Christi to Galveston Bay and Texas City.
Motiva, owned by Saudi Aramco, is the largest refinery in the U.S. with a total throughput of overly 600,000 bpd. It was forced to close at 5 a.m. on Wednesday August 30, having already reduced capacity by forty percent on Tuesday. Related: Can Mexico Capitalize On This Golden Oil Opportunity?
In total, some twenty percent of U.S. refinery capacity was affected by the storm. On Tuesday Platts reported that eighteen percent of capacity, or 3.36 million bpd, had been shut-down, while vessel traffic to coastal facilities in Corpus Christi had largely ceased. Another ten percent of capacity remains threatened as the storm moves East.
The shut-downs have sent gasoline prices soaring, offering lucrative opportunities to European refiners and depressed crude, which continues to struggle with over-supply and is now limited by the sudden loss of refinery capacity in the Gulf.
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