New York — US Gulf Coast refinery outages and port closures were spreading Tuesday as Tropical Storm Harvey continued to flood the area, lifting gasoline prices. The eye of the storm was offshore midday Tuesday, and was expected to shift northeast onshore Louisiana by Wednesday.
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Roughly 2.33 million b/d of Texas refining capacity remained down due to shutdowns, but with refiners also cutting rates that figure is likely much higher. If those cutting runs are at 50% of capacity, that would put the total downed capacity at 3.36 million b/d (18% of the US total).
Vessel traffic into and out of the US Gulf Coast has largely been closed, restricting oil and refined products imports and exports. The US Coast Guard set port condition Zulu for Louisiana port Lake Charles and Texas ports Beaumont, Nederland, Orange, Port Arthur, Port Neches, Sabine and Sabine Bar.
The ports of Corpus Christi and Houston remained closed Tuesday, and Corpus Christi was hoping for a restart date of September 4.
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* Refined product futures were up sharply again Tuesday. At 1630 GMT, the October NYMEX RBOB crack spread was trading around $21.00/b, up from $15.23/b last Tuesday. The October ULSD crack was trading around $23.05/b, up from $19.21/b last Tuesday.
* The September Eurobob gasoline crack swap traded as high as around $15.60/b in European trading, the highest level since early April 2016.
* Spot gasoline price differentials were higher Tuesday. US Gulf Coast CBOB traded at October NYMEX RBOB plus 18 cents/gal, up 8 cents/gal from Monday. Midwest gasoline differentials were also higher as the Texas-to-Illinois Explorer Pipeline plans to close midnight Tuesday to allow products to back up at the start of the line and enable faster deliveries.
* Western Canadian crude oil prices sank Tuesday to nearly five-month lows as the market began to price in the expectation that North America will see a massive oversupply of crude as the Texas refining sector remains largely out of commission. The benchmark heavy sour grade, Western Canadian Select ex-Hardisty, traded at the underlying West Texas Intermediate calendar-month average minus $11/b for October barrels, down more than $1/b from where it traded at the end of last week.
* The stream of distillate cargoes from the US Gulf Coast to Northwest Europe and the Mediterranean basin has all but halted in the last eight days as tropical storm Harvey has forced the closure of terminals, ports and refineries in addition to potentially disrupting market flows. Given the disruption there is talk of potentially a reverse arbitrage from Europe to the US emerging. Europe potentially supplying Latin America is perhaps more likely initially, but this was heard to be just talked about so far, as people wait for the situation in the US to clarify.
* US refiners have begun making inquiries for prompt-loading jet cargoes from North Asian suppliers. While the exact volume of jet fuel that US refiners were looking to import was not clear, sources said they were seeking 35,000 mt cargoes. Asian traders said that these US refiners and traders could have to turn elsewhere for prompt cargoes, given the relatively well balanced nature of the North Asian spot market.
* Various Northeast Asian end-users are bracing themselves for possible lengthy delays in the delivery of North and Central American crude oil supply, with three South Korean refiners expecting to receive cargoes from the US and Mexico behind their initial September schedule. At least two South Korean refiners and one Chinese refiner had fixed a few Suezmax and VLCC cargoes to co-load their Mexican term barrels with Eagle Ford crude for delivery in the second half of September. But the companies are now expecting delays of around one to two weeks for the barrels to reach Asia.
* Roughly 2.33 million b/d of Texas refining capacity remained down, or 12.6% of US capacity. But with refiners cutting rates that figure is likely much higher. Assuming the plants cutting runs are operating at 50%, that would put the total loss at 3.36 million b/d, or 18% of total US capacity.
* The following plants have been or are in the process of being shut or reducing runs:
(Company: Location -- Capacity (b/d))
Total capacity closed: 2,331,529
Share of US capacity: 12.6%
* The following plants have reduced rates:
(Company: Location -- Capacity (b/d); 50% of Capacity (b/d))
- Motiva: Port Arthur, TX -- 603,000; 301,500
- Flint Hills: Corpus Christi, TX - West -- 230,000; 115,000
- Lyondell: Houston, TX -- 263,776; 131,888
- Valero**: Texas City, TX -- 225,000; 112,500
- Marathon**: Galveston Bay, TX -- 459,000; 229,500
- Marathon**: Texas City, TX -- 86,000; 43,000
- Valero**: Houston, TX -- 191,000; 95,500
Total capacity reduced: 1,028,888
Closed + reduced capacity: 3,360,417
Share of US capacity: 18.1%
* The Texas Gulf Coast is home to 4.944 million b/d of refining capacity, while the Louisiana Gulf Coast is home to 3.696 million b/d of capacity, according to the US Energy Information Administration. Total US capacity is 18.557 million b/d.
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PIPELINES AND RAIL
* Colonial Pipeline is running at reduced capacity due to limited supply from Houston refiners. Colonial delivers refined products to the US Northeast.
* The Explorer Pipeline hauling refined products from Texas to Illinois will close around midnight Tuesday to allow product to back up at the start of the line and enable faster deliveries at the northern end. The line should reopen sometime before Friday.
* Magellan Midstream has suspended operations on two long-haul pipelines, BridgeTex and Longhorn, which carry a combined 675,000 b/d of crude from the Permian Basin in Texas to the US Gulf Coast.
* Kinder Morgan shut down "select systems" of its 300,000 b/d crude and condensate pipeline in Texas. The shut-in is being implemented on the 250-mile Kinder Morgan Crude and Condensate line.
* Kansas City Southern Railway Company's force majeure and embargo for areas in its network in Texas impacted by Tropical Storm Harvey were in place Monday. On Friday, the Kansas City-based company declared force majeure and an embargo on shipments via Laredo and Brownsville-Matamoros going to Houston and Corpus Christi.
* Deliveries from Seaway and the Enterprise crude oil distribution system to certain delivery points may be on allocation from time to time or not in service, subject to disruptions of electrical power to pump stations and/or restrictions at receipt points.
PORTS AND TERMINALS
* The US Coast Guard set port condition Zulu for Louisiana port Lake Charles and Texas ports Beaumont, Nederland, Orange, Port Arthur, Port Neches, Sabine and Sabine Bar, closing all inbound and outbound traffic.
* Corpus Christi area ports remained closed, and Houston-Galveston area ports remained closed.
* Phillips 66 shut its Beaumont crude and products storage terminal at Nederland, Texas. Phillips 66 has 10.2 million barrels of crude and product storage capacity at the terminal. The terminal connects to the Bayou Bridge Pipeline, which transport crude directly to the Lake Charles Refinery in Louisiana, including Permian and Bakken crude.
ONSHORE OIL AND GAS PRODUCTION
* Oil operators in the onshore Eagle Ford Shale in South Texas have begun to restart wells and related midstream facilities. Marathon Oil and EOG Resources were inspecting and assessing their Eagle Ford Shale operations in South Texas on Tuesday and have begun to restart production where possible. BHP Monday said it was ramping up production in the Eagle Ford. Before the storm hit, the Eagle Ford was producing about 1.341 million b/d of oil, and 5.1 Bcf/d of natural gas, according to data from Platts Analytics' Bentek Energy unit.
OFFSHORE OIL AND GAS PRODUCTION
* US Gulf of Mexico offshore production was returning Tuesday. The US Bureau of Safety and Environmental Enforcement showed 319,523 b/d of oil output shut-in on Tuesday, or 18.26% of total Gulf of Mexico output, down from 428,568 b/d Saturday.
* Anadarko Petroleum has resumed production at its Constitution, Heidelberg, Holstein and Marco Polo platforms, all located in the central Gulf of Mexico. Anadarko also resumed production at its operated Lucius facility in the Gulf of Mexico.
--Staff reports, email@example.com
--Edited by Lisa Miller, firstname.lastname@example.org