Crude oil slid and gasoline futures hit their highest since mid-2015 on Aug. 30 as flooding and damage from Tropical Storm Harvey shut over one-fifth of U.S. refineries, curbing demand for crude while raising the risk of fuel shortages.
Refineries with output of 4.1 million barrels per day were offline on Aug. 29, representing 23% of U.S. production, Goldman Sachs said. Restarting plants even under the best conditions can take a week or more.
“It will be a while before operations can return to normal and the U.S. refining industry is bracing itself for an extended shutdown,” Stephen Brennock of oil broker PVM said.
Brent oil, the international benchmark for crude trading, was down 50 cents at $51.50 a barrel by 8:39 EDT. U.S. crude fell 44 cents to $46.00.
Eagle Ford Shale E&P stocks fell on Aug. 29 amid reports of idled operations and 19% of Gulf of Mexico (GoM) oil production remained shut-in while 11 refineries on the Texas Gulf Coast were reported to have shuttered operations as Hurricane Harvey continued to torment the state.
Some Permian Basin and Eagle Ford Basin operators may also be affected by pipeline closures or reduced throughput.
Harvey is forecast to produce more rain—as much as 13 inches—through Sept. 1 over the upper Texas coast and into southwestern Louisiana. On Aug. 29, the storm was offshore Texas and forecast to move to the upper coasts of Texas toward evening.
More than a dozen Eagle Ford operators reported either suspending operations or evacuating personnel. Others said they have so far not been affected.
SM Energy Co. (NYSE: SM) said in an Aug. 28 regulatory filing that its operations are not in flooded areas and have not been affected by the storm. However, refinery impacts were being felt.
“We are experiencing temporary curtailments of some of our production due to the impact of the storm on third-party, downstream infrastructure,” SM Energy said. “It is too early to quantify any effect curtailments will have on our production as the storm continues to move through the state.”
Carrizo Oil & Gas Inc. (NYSE: CRZO) also said the biggest impact production it may face is third party terminals and midstream providers that shut down, Raymond James analysts said.
“While a storm of this magnitude will have an impact on our production, it’s too early at this point to quantify what that will be,” Raymond James quoted management as saying. Carrizo shares closed at $12.46 after a 6.5% drop to $12.48 on Aug. 28. Other companies, such as EOG Resources Inc. (NYSE: EOG), remained down, with EOG’s stock falling 1.6% to $83.15 on Aug. 29 from $84.52 on Aug. 25.
The Permian Basin was also affected by midstream shutdowns.
Incoming crude supplies to Houston were hampered by the closure of the Magellan Longhorn and BridgeTex pipelines from West Texas, halting a combined capacity of about 600,000 barrels per day (bbl/d), Sandy Fielden an analyst at Morningstar Commodities said in an Aug. 29 report.