Oil Prices Drop as Market Grapples with Harvey Damage

"Harvey has helped speed that along even more". Officials said the refinery, which hasn't been shutdown by the historic flooding, requested the release of emergency oil.

Gasoline margins RBc1-Clc1 jumped, as the gasoline crack spread jumped 12.5 percent to $23.45 a barrel, highest on a seasonal basis since 2012. Harvey, which began as a Category 4 hurricane but was downgraded shortly after hitting Texas, has not affected that refinery's output. More than one-fifth of US refining capacity has been shuttered, according to S&P Global Platts.

Goldman Sachs (NYSE: GS-PB - news) analysts said in a report that "information on the extent of the damages incurred by the oil and gas infrastructure remains limited at this point".

"No doubt, Harvey has impacted operations and access to refineries in the Gulf Coast".

Still, analysts predict drivers will see slightly higher gasoline prices due to restrictions on supply.

Brent crude settled up instead, showing the global oil benchmark's relatively better fundamentals to WTI.

Soaring U.S. gasoline prices mean it is now profitable to send the fuel from Singapore to Asia. The source added that the impact from the storm would "linger for several days".

It could take two weeks or longer before big refineries in the Houston area can recover from a record-setting deluge and resume normal operations, assuming they didn't suffer serious damage, which is still unknown.

The U.S. National Hurricane Center (NHC) said on Monday that Harvey was moving away from the Texas coast but was expected to linger close to the shore through Monday, resulting in ongoing strong rainfall and flooding.

As the life-and-death circumstances of Tropical Storm Harvey occupied the minds of countless Texans, the pocketbook consequences of the massive storm were already having an effect on Americans who drive. CincyGasPrices.com says local gas prices are at $2.35 per gallon as of Wednesday, up about 10 cents from last week.

"I don't think we're going to see any dramatic changes in activity locally", Hathaway said.

The Georgia-based company said in a statement that it expects to shut off the line Thursday. Colonial Pipeline Co., the largest US conduit for the fuel, planned to halt its gasoline line Thursday because about half of Gulf Coast refining capacity was offline.

U.S crude inventories fell by approximately 5.4m barrels in the week ended Aug 25, beating expectations of a draw of about only 1.9m barrels. The Gulf accounts for almost half of total United States refining capacity.

If anything, the oil industry is grappling with too much supply because of shale.

While Harvey may have a short-term impact on global crude and product markets, the question is how quickly US production and exports return to normal.

  • Zachary Reyes