Hurricane Florence is expected to make landfall on the US East Coast late Thursday with strong winds, heavy rains and flooding likely to impact energy and commodity markets.
As of Tuesday afternoon, the category 4 hurricane was about 800 miles to the southeast of North Carolina, moving Northwest at 17 mph, according to the National Oceanic and Atmospheric Administration. Its models indicate the eye of the storm will pass through the North Carolina coast early Friday morning with winds still above 110 MPH. The storm's four-to-five day track area extends as far south as Georgia and to near the northern tip of Virginia, with coastal and inland flooding expected following 10 to 15 inches of rainfall in much of North and South Carolina.
The most likely impacts are prolonged power outages across utility footprints, disruptions in natural gas production and transportation, delays in pipeline construction schedules and potential reductions in refined product supply to the Northeast.
Here are the key takeaways across commodities:
**Small volumes of gasoline blendstocks, diesel and asphalt are imported into Wilmington, North Carolina, and Charleston, South Carolina; these could be affected by the storm.
**The most recent monthly US Energy Information Administration data shows the two ports imported a combined 454,000 barrels of refined products in June, a small fraction of the roughly 308,700 b/d of gasoline sold in North Carolina alone.
**Concerns that the storm would impact refined products deliveries to the Northeast were bullish for the New York delivered NYMEX RBOB and ULSD contracts. NYMEX October RBOB settled 5.5 cents higher at $2.0142/gal and NYMEX October ULSD closed up 3.42 cents at $2.2520/gal.
**Rack prices were also higher in the Carolinas. Several coastal counties in the Carolinas have been ordered to evacuate, which could be driving up gasoline demand at the pump. It is common for drivers to hoard gasoline in times of natural disasters, which could be supporting rack prices.
**In Charleston, South Carolina, the price of unleaded, unbranded gasoline at the rack was reported at $2.0217/gal on Tuesday, up from $2.0200/gal on Monday evening, according to DTN, an independent provider of rack price data. In Wilmington, North Carolina, the same product was reported at $2.0635/gal Tuesday morning, up from $2.0408/gal on Monday night.
**No US offshore or onshore oil production facilities or oil refineries are currently in the path of Florence.
**The Northeast is heavily dependent on the Colonial Pipeline and Plantation Pipeline for refined products supplies, both of which run through the Carolinas. Colonial's 2.5 million b/d system extends from Texas to New Jersey, with Line 1 moving gasoline from Houston to Greensboro, North Carolina, and the parallel Line 2 extending all the way to New Jersey. Kinder Morgan's 700,000 b/d Plantation system ships refined products from Louisiana to the Washington, DC, area.
**The pipelines were operating normally Tuesday, and their operators were closely monitoring the storm. Both are able to operate in segments, so if a portion in North Carolina or South Carolina were to go offline, the pipelines would be able to deliver product north. But operating those northern segments depends on how much product is in the tank north of an outage, and so the pipeline would only be able to continue supplying the Northeast for several days.
**Regional ports were preparing for the storm. Wilmington and Charleston were at condition X-RAY around the NYMEX settle -- meaning they were open -- but condition Zulu was expected by 12 am EDT, according to the US Coast Guard. Zulu condition means gale force winds are expected within 12 hours and ports will close to commercial traffic.
**Florence could result in up to 2 Bcf/d of lost Northeast production, according to Platts Analytics estimates based on the impact of prior storms in the region.
**In Pennsylvania, the four major gas-producing reporting areas -- Northeast Dry, Central Dry, South Dry and Southwest Wet -- are within the potential path of Florence. The areas account for more than 17 Bcf/d of the total 29 Bcf/d production in the Northeast.
**The last hurricane to strike the Mid-Atlantic and impact Northeast production was Matthew, which made landfall as a Category 1 storm over South Carolina in late September 2016, resulting in temporary loss of about 1 Bcf/d of production.
**So far the storm has had little impact on natural gas prices, according to Platts data.
**In Tuesday's trading in the Appalachian region, Dominion North was down 4 cents to $2.33/MMBtu, and in the Northeast, Iroquois Zone 2 rose 1 cent to $2.93/MMBtu. Algonquin city-gates gained 2 cents to $2.85/MMBtu.
**Transco Zone 5 delivered, the pricing point in North Carolina that would most likely see the first impacts from Florence, was up by only about 2 cents to trade at $3/MMBtu.
**Florence could push back the start date for the full capacity of Williams' Atlantic Sunrise expansion of the Transcontinental Gas Pipe Line system, currently set for September 17. The pipeline, which is currently flowing at 550 MMcf/d, will be able to flow 1.7 Bcf/d when fully in service.
**Excessive rain from Florence will likely add to weather-related construction delays on TransCanada's Mountaineer XPress project, part of its Columbia Gas Transmission system. TransCanada is targeting startup by the end of the year on the 2.7 Bcf/d project.
**Florence also could disrupt operations at the two LNG export terminals on the East Coast.
**Dominion Energy, which owns the Cove Point, Maryland, terminal has activated its severe weather preparation and response plan.
**Kinder Morgan, which owns the Elba Island terminal in Georgia, said it was continuing to monitor the storm and that the terminal and related assets remained fully operational Tuesday.
**Duke Energy expects it to take anywhere from "multiple days to several weeks" to restore infrastructure damaged by the storm.
**The company was moving power restoration crews, numbering 4,600 people, from Florida, Indiana, Kentucky and Ohio utilities to staging locations in the Carolinas.
**SCE&G has contract crews and employees, numbering 2,800 people, standing by for restoration efforts.
**Twelve of the US' 99 nuclear units are located in the Carolinas. Nuclear plants are required to shut down if winds are expected to exceed 73 mph.
**The Port of Charleston is the fourth-largest export point for US polyethylene behind the districts of Houston and Galveston, Los Angeles and New Orleans. These shipments could be affected.
**Through June this year, Charleston had exported 46,302 mt of PE, according to US International Trade Commission data. In 2017 60,329 mt of PE was exported from Charleston, up nearly 63% from 2016.
**The Carolinas are home to more than 4 million mt/year of polyethylene terephthalate capacity between producers DAK Americas, Indorama and Nan Ya Plastics.
**DAK Americas planned to shut its 660,000 mt/year plant in Charleston, a person with knowledge of company operations said. Its 1.3 million mt/year plant in Columbia, South Carolina, was operational at press time, while the status of its Fayetteville, North Carolina, plant could not be verified.
**Nan Ya's 1.2 million mt/year plant in Lake City, South Carolina, was operational at press time.
**Nine primary steel mills are in the path of the storm, totaling nearly 10 million short tons/year of raw steelmaking capacity -- or approximately 8% of total steel capacity in the US.
**The hurricane is delaying coking coal shipments from the biggest US port of Hampton Roads, Virginia, and threatens to further choke availability of spot cargoes through mid-October.
**The Port of Virginia, which oversees the main export coal artery of Hampton Roads, said on its website that terminal activities would stop Tuesday night before the arrival of Hurricane Florence.
**S&P Global Platts assessment of US East Coast low-vol hard coking coal spiked $8 to $185/mt FOB on Tuesday.
**Liberty Steel's Georgetown, South Carolina, wire rod mill was evacuated at noon Tuesday, the company told Platts.
**Two of Nucor's steel mills in the Carolinas -- Nucor Steel Berkeley and Nucor Steel Hertford -- were suspending operations until the storm passes. "Suspension of operations is not expected to impact customer orders," the company told Platts.
**Little row crop impact is expected, with the exception of northern cotton acres.
**Soybean crop loss could reach 30% in the Carolinas and Virginia, according to sources, but 30 million bushels is not enough to have significant impact to the US as a whole.
**The hurricane could disrupt the slaughter of hogs, adding strength to cash prices away from the hurricane-affected area. North Carolina accounts for 13% of the total US hog inventory, according to Platts Analytics.
**The hurricane will likely reduce vehicle traffic, which would lower demand for ethanol. Delivered ethanol rail cars to Richmond, Virginia, were trading at a 12 cents/gal premium to the benchmark Chicago market Tuesday morning, according to one source.