Louisiana terminals, refineries tested as Texas deals with Harvey: In the LOOP

The Louisiana Offshore Oil Port and regional refining industry could be set to carry the load in the near future, collectively establishing itself as the most important chunk of US oil infrastructure while Texas remains hobbled by Hurricane Harvey.

In three updates so far, LOOP has said its facilities are operating normally, although many facilities in neighboring Texas are shut.

"At this time, there are no interruptions to vessel operations or deliveries from the Clovelly Hub due to Hurricane Harvey," LOOP said Sunday.

Roughly 2.4 million b/d of refining capacity has been shut along the Texas coast, while another major refinery is operating at reduced rates. Some offshore oil and gas operators evacuated platforms and rigs, although offshore production was picking up a bit Sunday, while onshore operators were shutting in what may amount to hundreds of wells in the Eagle Ford Shale in South Texas. The USGC crude market has ground to a halt.

The four major ports in the Houston-Galveston area complex are closed to all inbound and outbound traffic: the Port of Houston, Port of Texas City, Port of Galveston and Port of Freeport.

LOOP typically ranks No. 3 behind Houston and Port Arthur for US crude imports and accounts for 10% of US imports and 16% of Gulf Coast imports, according to Platts Analytics and US Customs data. But with Texas ports closed, LOOP could be set to reclaim the title of No. 1 port for US crude imports, which it has not held since May 2016.

Latest crude flows at LOOP, regional ports

At LOOP last week, Marathon imported about 500,000 barrels of 28.4 API Vasconia from Colombia on the tanker Krymsk on August 22 and another 491,000 barrels of 28.4 API DCO from Venezuela on the Karvounis on August 24, Platts Analytics and US Customs data showed.

According to cFlow, Platts' trade-flow software, the tankers Megacore Philomena and SKS Spey are currently in waters near LOOP's offshore marine terminal and likely unloading crude. Megacore Philomena is laden with 365,000 barrels of crude from Mexico, according to Platts fixture reports, although it stopped at Freeport, Bahamas, before arriving at LOOP. SKS Spey picked up crude at the Bonga and Forcados oil terminal in Nigeria before sailing to Sint Eustatius in the Caribbean and ultimately LOOP. The Suezmax Sonangol Namibe is expected to arrive at LOOP on August 29, while the VLCC Leicester is expected to arrive September 15, both having sailed from Al Basrah, Iraq.

The last crude import into Texas was 277,000 barrels of 15.7 API Xan Coban from Guatemala, brought into Port Arthur on Friday on the tanker Augusta by an as-yet-unknown consignee. Since Friday, another 1.975 million barrels of Castilla, Basrah Heavy and Zuata have been imported by Chemium, Chevron and Valero into Alabama, Mississippi and Louisiana.

Could Louisiana carry the load?

While crude receipts in Louisiana could go uninterrupted, it is unclear how much slack Louisiana refineries can pick up. Louisiana Gulf Coast refineries ran at roughly 93% of operable capacity in January-May for 3.431 million b/d of crude runs, according to the latest US Energy Information Administration figures. Since 2016, the top utilization rate was 97.2% in May. If Louisiana refineries could stretch to achieve that, even temporarily, that would mean an extra 162,000 b/d of crude consumption and 123,000 b/d of products as a result.

But Louisiana typically does not send refined products to Texas. Instead, products move north along the Colonial-Shell joint-venture Bengal Pipeline, which eventually connects with the Colonial system that takes barrels to US Atlantic Coast demand centers. Bengal carried 579,000 b/d of refined products in Q1 2017.

Louisiana refined products could make their way into Texas by truck or barge, but each of those presents problems given shut terminals and flooded roads.

The market already senses a shortage. USGC ULSD differentials jumped Monday to their highest price since September 2016, while prices for jet fuel and gasoline also were rising.

The 'In the LOOP' Americas crude oil wrap runs each Monday in Crude Oil Marketwire, North American Crude and Products Scan and on the Platts Global Alert. You can read the FAQ: USGC LOOP Sour crude here and find the full special report LOOP Sour Crude: A benchmark for the future here.