latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/analysts-sound-profit-warning-after-hurricanes-fail-to-lift-gasoline-prices-60757381 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Analysts sound profit warning after hurricanes fail to lift gasoline prices

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

European Energy Insights - September 2020

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Analysts sound profit warning after hurricanes fail to lift gasoline prices

Atlantic basin tropical storms that would normally send gasoline prices soaring have had relatively little effect on a U.S. petroleum market still in the throes of a pandemic, demonstrating the magnitude of the supply glut that could linger through the end of the year.

"We worry that another round of negative EPS revisions may be in store given how margins are shaping up so far in [the fourth quarter]," Tudor Pickering Holt & Co. analysts wrote Oct. 13. Since the beginning of October, they said, average U.S. Gulf Coast gasoline cracks, an indicative measure of the profitability of refining crude oil into gasoline, are up 45.3% from the $6.64-per-barrel third-quarter average. But they warned that those profits tend to fade as winter approaches "especially … when rough weather crimps demand."

There are still roughly six weeks left in an Atlantic basin hurricane season during which eight tropical weather systems have made landfall along the U.S. Gulf Coast, a crossroads of oil and petroleum transportation infrastructure and home to just over half of the country's 18.6 million barrels per day of refining capacity.

On Aug. 26, the day before Hurricane Laura made landfall on the Louisiana coast as a category 4 hurricane, gasoline futures prices for delivery at New York Harbor peaked at $1.36 per gallon, up nearly 8 cents from five days earlier.

In the wake of that storm, weekly Gulf Coast crude oil processing fell to 6.4 million barrels per day, its third-lowest level since the start of 2010. Since the beginning of that decade, the only time crude oil processing was lower was around the time of 2017's Hurricane Harvey, which made landfall on Aug. 25 of that year near Port Aransas, Texas. In that storm's wake, gasoline prices spiked to $2.14 per gallon on Aug. 31, 2017, a 56-cent-per-gallon increase from the price 10 days earlier.

More recently, Hurricane Delta failed to drive gasoline prices significantly higher when it struck the coast on Oct. 9 in the vicinity of where Hurricane Laura had made landfall six weeks earlier.

SNL Image

SNL Image

The lack of a price response during this year's hurricane season comes despite the fact that U.S. refinery utilization has been below average since March. Average utilization at Gulf Coast refineries had bottomed in May but reached new lows in September. And as Delta approached in October, both CITGO Petroleum Corp.'s 418,000 b/d Lake Charles refinery and Phillips 66's 260,000 b/d Westlake refinery remained down because of power outages caused by Hurricane Laura.

SNL Image

Moody's said Oct. 12 that Hurricane Delta would "prolong the recovery period" for local refineries already recovering from Laura's damage, but "sufficient inventories of U.S. refined products should limit any impact to consumers" outside of some local areas.

The silver lining for the refining industry is that gasoline stockpiles have fallen from their April 17 peak of 263.2 million barrels to 225.1 million barrels on Oct. 9, according to U.S. government data. At the same time, distillate stockpiles, which have acted as a "governor" on refinery crude oil demand, have fallen for four consecutive weeks but remain well above historical averages.

Tudor Pickering Holt analysts noted Oct. 16 that diesel cracks have averaged $8.40/b versus Brent over the past week, a 59-cent improvement from the September average, but far below the $20/b level at the start of the year.

"The drop has been especially painful considering that diesel has been a bright spot for a long time, with better cracks than gasoline in nine of the past 10 years," they said. But they pointed to recent stockpile draws, sequential monthly gains in the Cass freight index from May through August, and a "slow recovery" in air traffic that has allowed refineries to increase jet fuel yields while lowering distillate yields as reasons for optimism. "To be clear, conditions still look challenging, with both the 2021 and 2022 diesel curves easily below any year in 2013-19. But the recent improvement indicates we may be near a bottom."