Sunday, September 3, 2017

Harvey shuts down a quarter of US refining just a week after refining records were set; gasoline shortages result...

we're going to start with Hurricane Harvey, and what it has done to US energy infrastructure...although there was considerable damage to structures in the Corpus Christi area when it came on shore as a Category 4 storm with 130 mph winds near Rockport, Texas, about 20 miles up the coast, by far the greatest damage was from the rainfall, which surpassed 30 inches in a broad swath of the state from 50 miles west of Houston all the way to the Louisiana border...so we'll start with a map that shows where that rainfall fell..

Harvey rain totals

the above map comes from the National Weather Service out of Brownsville Texas and as the legend indicates, it shows the extent of the area that received rainfall totals exceeding 20 inches in green, exceeding 30 inches in blue, and exceeding 40 inches in purple...for those of you not familiar with Texas geography, note the 50 mile scale near the lower left hand corner to get an idea about the breadth of the areas receiving such quantities of rain...Harvey was by far the worst rainfall disaster in US history, seeing the greatest amount of rain ever recorded in the Lower 48 states from a single storm, while the 51.88 inches of rainfall measured in Cedar Bayou east of Houston was the most rainfall that ever fell on one place in one event in the continental US....an estimated 24.5 trillion gallons of water fell on Southeast Texas and southern Louisiana during the storm; that's enough water to cover the entirety of Washington DC 1,727 feet deep, more than 3 times the height of the Washington Monument...estimates are that roughly 460,000 Texans were flooded out, and as many as a million cars were damaged or destroyed...the disaster was exacerbated by urban sprawl into what were once wetlands, where wetlands that could have mitigated the flooding were paved over, and hence could not absorb any of the rain...the Texas coast terrain is relatively flat and drainage infrastructure is inadequate, so with the storm surge forcing high water into the mouths of the bayous, the rain that fell just accumulated on the already saturated surface...

next, we'll include a map that shows the track of Harvey through the Gulf Coast oil and gas infrastructure:

August 29 2017 Platts map of Harvey

this map came from Platts on Tuesday, and the original version of it just showed the forecast track of Harvey, then a tropical storm, from that day forward...i've added the approximate path that Harvey took over the prior Friday through Tuesday period so you can see how the storm moved over land...notable features on this map include the Eagle Ford shale basin in yellow, inland from Corpus Christi and Houston; oil import and export ports, shown as blue diamonds; oil and gas pipelines, shown in blue and orange; LNG terminals, shown as pink triangles, and refineries, shown as variously sized and colored circles, to indicate the amount of oil each normally processes and their status at the time this map was made...the initial impact of the hurricane was to shut down offshore oil and gas production in the western Gulf, as crews were removed from the offshore platforms when the track of the storm was still uncertain...at the same time, at least 25 oil tankers carrying almost 17 million barrels of imported crude were stuck offshore, unable to unload as the Texas ports closed in anticipation of the storm....then, when the storm hit Corpus Christi, its refineries were shut down and loading of crude oil exports from both the Permian and Eagle Ford was halted...although Harvey was downgraded to a tropical storm by the time it made it into the Eagle Ford, most oil production from that field had ahlready been shut in...

now remember, circulation around a hurricane is counter-clockwise, so over this entire time it was drawing moisture in from the warmer than normal Gulf on the eastern side of the storm and pushing the heaviest rain northward into the Houston area...at that point, the storm stalled, moving no more than 2 miles an hour, till it slowly turned around and moved back out into the Gulf, with heavy rain bands now extending as far east as New Orleans (not shown above); the above map thus shows the refinery closures at that time, but as we shall see in the next table, large refineries in Beaumont and Port Arthur marked as operational above were eventually shut down too, as Harvey's late week rainfall later flooded those areas...

the table below comes from an article at Platts titled Oil Factbox: Gasoline prices soar on Harvey-related outages and it shows the major refinery outages caused by Harvey as of early Friday...roughly 47% of US refining capacity is on the Gulf Coast, and more than half of that was impacted by Harvey...most of these refineries were flooded, so they may be down for a while...for instance, the Saudi owned Motiva refinery in Port Arthur, the largest refinery in the US, will be shut for at least two weeks...Exxon's Baytown, the 2nd largest US refinery, was hit by the Houston area flooding, and may be back online sooner...however, Exxon's Beaumont refinery reports flooding still ongoing, with water well over the 10 foot levee protecting the plant, and oil spilling into that water...and that Corpus Christi refineries remain shut down a week after the hurricane passed them may mean they've sustained some storm damage, since flooding was not a major problem that far south down the Texas coast...

August 31 2017 refineries shutdown via Platts

notice that as of Friday, this table indicates that 22% of US refining capacity was still offline, meaning 4 million barrels per day of oil were not being refined; others put that figure at 4.4 million barrels, which would mean that one quarter of US refining has been shut down...the result of this has been to push oil prices down, while prices for gasoline, distillates and jet fuel have all been rising...there are already shortages of gasoline in some areas of Texas, and panicked gas lines have formed where gasoline is available...on Wednesday, the Colonial Pipeline, normally carrying gasoline, diesel and jet fuel from several refineries in Houston, Port Arthur through the south Atlantic states to New York, was shut down for lack of supply; that pipeline normally carries “roughly one in every eight barrels of fuel consumed in the country"...a day earlier, the Explorer Pipeline from Houston to Chicago was shut down, cutting off the normal supplies for the Chicago area...even though there are nearly a quarter of a billion barrels of gasoline stockpiled in the US, it's not in the right places to address these Midwest and East Coast shortages; pipeline terminals typically only have a five-day supply in storage to meet immediate needs...bottom line, that means higher prices and gasoline shortages might hamper travel over the Labor Day holiday weekend...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending August 25th, ie, the week before Harvey hit land, showed a big drop in our imports of crude oil, a new record for the amount of crude oil being used by US refineries, and hence another withdrawal of from our stored supplies of crude oil....our imports of crude oil fell by an average of 885,000 barrels per day to an average of 7,905,000 barrels per day during the week, while at the same time our exports of crude oil fell by 34,000 barrels per day to an average of 902,000 barrels per day, which meant that our effective imports netted out to an average of 7,003,000 barrels per day during the week, 851,000 barrels per day less than during the prior week...at the same time, our field production of crude oil inched higher by 2,000 barrels per day to an average of 9,530,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,533,000 barrels per day during the cited week... 

during the same period, refineries were using 17,725,000 barrels of crude per day, 264,000 barrels per day more than they used during the prior week, while at the same time 771,000 barrels of oil per day were being pulled out of oil storage facilities in the US...hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 421,000 less barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+421) barrel per day figure onto line 13 of the weekly U.S. Petroleum  Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...note that last week's unaccounted for crude was -396,000, a swing of 818,000 barrels per day, and hence the week over week data is accordingly suspect..

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,146,000 barrels per day, which was 4.6% below the imports of the same four-week period last year....this week's 2,000 barrel per day increase in our crude oil production was the result of a 14,000 barrel per day increase in oil output from Alaska, which was offset by a 12,000 barrels per day decrease in oil output from wells in the lower 48 states...the 9,530,000 barrels of crude per day that were produced by US wells during the week ending August 25th was the most oil US wells have produced since July 17, 2015, 8.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.3% more than the 8,488,000 barrels per day of oil we produced during the during the week ending August 26th a year ago, while our oil output was still 0.9% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015... 

US oil refineries were operating at 96.6% of their capacity in using those 17,725,000 barrels of crude per day, which was up from 95.4% of capacity the prior week, and the highest refinery utilization rate since August 26, 2005....the 17,725,000 barrels of oil refined this week was the most ever refined in US history, 149,000 barrels per day more than the previous record, 6.7% more than the 16,615,000 barrels of crude per day.that were being processed during week ending August 26th, 2016, when refineries were operating at 92.8% of capacity, and roughly 12.9% above the 10 year average of 15.7 million barrels of crude refined per day at this time of year...

with this week's record level of oil refining, gasoline production from our refineries increased by 36,000 barrels per day to a new record high of 10,602,000 barrels per day during the week ending August 25th, topping the record just set last week...that put this week's gasoline output at a level 5.8% higher than the 10,021,000 barrels of gasoline that were being produced daily during the comparable week a year ago....however, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 36,000 barrels per day to 5,055,000 barrels per day at the same time, which was still 1.6% more than the 4,973,000 barrels per day of distillates that were being produced during the week ending August 26th last year.... 

with this week's record gasoline production, our end of the week gasoline inventories increased by 35,000 barrels to 229,937,000 barrels by August 25th, only the 3rd small increase in gasoline inventories in 11 weeks...that was as our domestic consumption of gasoline rose by 217,000 barrels per day to a record 9,846,000 barrels per day, and as our imports of gasoline rose by 284,000 barrels per day to 839,000 barrels per day, and as our exports of gasoline rose by 44,000 barrels per day to 637,000 barrels per day...however, with significant gasoline supply withdrawals in 8 out of the last 11 weeks, our gasoline inventories are still 0.9% below last August 26th's level of 232,004,000 barrels, while they are still 7.4% higher than the 214,163,000 barrels of gasoline we had stored on August 28th of 2015, and roughly 9% above the 10 year average for gasoline supplies for this time of the year...

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels managed to increase by 748,000 barrels to 149,163,000 barrels over the week ending August 25th, the third modest distillates inventory increase in a row…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 167,000 barrels per day to 3,910,000 barrels per day, while our imports of distillates fell by 48,000 barrels per day to 84,000 barrels per day, and as our exports of distillates fell by 20,000 barrels per day to 1,122,000 barrels per day....however, even after this week’s increase, our distillate inventories were still 3.6% lower than the 154,753,000 barrels that we had stored on August 26th, 2016, and fractionally lower than the distillate inventories of 149,951,000 barrels of distillates that we had stored on August 28th of 2015, even as they remain more than 5% above the 10 year average for distillates stocks for this time of the year…

finally, with the week's big drop in our oil imports while our refineries were using oil at a record pace, our commercial crude oil inventories fell for the 19th time in the past 21 weeks, decreasing by another 5,392,000 barrels to 457,773,000 barrels as of August 25th, leaving us with the least oil we've had in storage since January 15th, 2016...however, while our oil inventories as of August 25th ended 7.6% below the 495,238,000 barrels of oil we had stored on August 26th of 2016, they were still up considerably from the normal level for our oil supplies in the years before the oil glut started building up, ie., 8.1% higher than the 423,657,000 barrels in of oil that were in storage on August 28th of 2015, and 39.5% higher than the 328,119,000 barrels of oil we had in storage on August 29th of 2014... 

This Week's Rig Count

US drilling activity increased for the 3rd time in the past 10 weeks during the week ending September 1st, after a string of 23 consecutive weekly increases earlier this year, as  apparently there was no Harvey impact....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 3 rigs to 943 rigs in the week ending Friday, which was 446 more rigs than the 497 rigs that were deployed as of the September 2nd report in 2016, while it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil was unchanged at 759 rigs this week, which still left oil rigs up by 352 oil rigs over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 183 rigs this week, which was 95 more rigs than the 88 natural gas rigs that were drilling a year ago, but still way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one rig that was classified as miscellaneous was still drilling this week, compared to the 2 miscellaneous rigs that were working a year ago..

the Gulf of Mexico rig count fell by one rig to 16 Gulf rigs this week, as a rig offshore from Louisiana was shut down...nonetheless, the Gulf of Mexico count was still up from the 10 Gulf rigs that were running during the same week a year ago...the total US offshore rig count was the same as the Gulf count, since there was no other US offshore drilling activity except in the Gulf...

working horizontal drilling rigs fell by 2 rigs to 794 rigs this week, which left the horizontal rig count still up by 399 rigs from the 395 horizontal rigs that were in use in the US on September 2nd of last year, while their count was also still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the vertical rig count was up by 4 rigs to 68 vertical rigs this week, which was also up from the 60 vertical rigs that were deployed during the same week last year...at the same time, the directional rig count was up by 1 rig to 81 rigs this week, which was also up from the 42 directional rigs that were deployed on September 2nd of 2016.... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 1st, the second column shows the change in the number of working rigs between last week's count (August 25th) and this week's (September 1st) count, the third column shows last week's August 25th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 2nd of September, 2016...      

September 1 2017 rig count summary

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Anti-fracking group claims rejection of charter violates the Constitution - Athens NEWS - A group proposing a charter form of government for Athens County has argued on appeal that a local court erred in upholding a rejection of the proposal for the November ballot. The Athens County Bill of Rights Committee (ACBORC) filed a merit brief with the Fourth District Court of Appeals Tuesday, contending that the Athens County Board of Elections unconstitutionally rejected the proposal and that the Athens County Common Pleas Court improperly upheld that objection. In July, the elections board rejected the charter as invalid by saying that a proposed executive council (comprised of county elected officials who aren’t county commissioners) does not meet Ohio Revised Code requirements for a county executive under an alternative form of government. As with initiatives in the previous two years, this charter proposal doubles as an effort to keep oil and gas horizontal hydraulic fracturing (fracking) out of Athens County, through prohibiting the use of local water for fracking operations. It also would outlaw future fracking waste-injection wells, of which Athens County already has several in operation. In many ways, that is the driving force behind the proposal, as the original version of the charter that was proposed and rejected for the ballot in 2015 did not seek to change county government at all. The charter was also proposed and rejected in 2016 due to allegedly insufficient detail regarding changes to county government. Both times it made it to and was rejected by the Ohio Supreme Court. This summer, Athens County Common Pleas Judge George McCarthy sided with the county Board of Elections and upheld its latest rejection of the charter. The group filed an appeal of McCarthy’s decision with the Fourth District Court of Appeals on July 28. The ACBORC also filed a protest of the elections board decision with Ohio Secretary of State Jon Husted. Earlier this month, Husted dismissed the protest without considering the merits, instead saying it was improperly filed. Husted determined that Ohio law barred the petitioners from filing the protest with his office after they already had appealed the elections board’s decision to the Athens County Common Pleas Court. In addition to seeking an appeal of the Common Pleas Court decision with the Fourth District appellate court, the group has filed a complaint in mandamus in the Ohio Supreme Court in opposition to Ohio Secretary of State Jon Husted’s rejection of the issue.

New York denies key permit for new gas-fired power plant (AP) — State environmental regulators have denied a key permit for a $900 million power plant being built in southeastern New York. The Department of Environmental Conservation filed a decision Thursday with the Federal Energy Regulatory Commission saying the environmental review of the 7.8-mile natural gas pipeline to the plant was deficient. The Millennium Pipeline Company project would supply gas for Competitive Power Venture's 650-megawatt Valley Energy Center in Wawayanda, 53 miles north of New York City. The plant is due to go online next year. Environmental activists targeted the pipeline as a way to stop the power plant. FERC's approval was contingent on the state approving permits. Competitive Power Ventures, based in Silver Spring, Maryland, called the state's action "without merit" and said it's confident the pipeline will ultimately be approved. 

An update of demand factors affecting the gas market balance -- This is Part 2 of our update on the natural gas market balance in the injection season so far (from April 1 through August 15), using daily supply and demand data from ourNATGAS Billboard report (RBN’s joint report with IAF Advisors). We began in Part 1 of this series with a fresh look at the relative strength of the gas market compared to last year, starting with the supply side. We’ll continue that analysis with a discussion of the demand side of the seasonal balance in a bit. Ahead of Hurricane Harvey, the CME/NYMEX Henry Hub September natural gas futures contract this past Friday settled at $2.892/MMBtu, down 5.7 cents on the day, as the market awaited the impact of the storm. Since then, preliminary gas pipeline flow data show major shifts in supply and demand (more on that in the blog). As of Sunday evening, the September contract was complacent, up little more than a penny in after-hours trading. We’ll know more about the effects of Harvey and the market’s reaction today and in the coming days and weeks. But prior to Harvey, the gas market has been sluggish in recent months. Last Friday’s settlement is down 34 cents from the summer peak expiration settlement in June of $3.236. The U.S. natural gas inventory deficit to last year has come down from more than 400 Bcf at the start of injection season in April to about 220 Bcf as of the latest storage data. What’s behind the higher injections and lower prices up to this point? Today, we continue our analysis of the gas market balance, including the latest on Harvey.

Americans Red and Blue Unite Against Trump's Plan to Drill the Atlantic -  By almost any account, the partisan divide in this country today is wider than it's been in living memory, certainly wider than it was before he took office. But on one issue, at least, the president seems to have bridged that divide and fostered some much-needed unity. When it comes to endorsing Trump's plan to open up the Atlantic coast to oil and gas drilling , citizens in both red and blue states—as well as their elected officials—are speaking with one voice. They're saying, "Hell, no." When Trump issued an executive order unveiling his new America-First Offshore Energy Strategy back in April, his administration announced that the National Outer Continental Shelf Oil and Gas Leasing Program would be one of its key components. Under the aegis of this new program—which essentially reverses the Obama administration's 2016 ban on drilling in the Atlantic—the U.S. Department of the Interior would begin considering new leases for oil and gas rigs along the Eastern Seaboard for a five-year period beginning in 2019.  Trump knew the move would enrage many of those who didn't vote for him and who already oppose his pro-extraction, anti-renewables energy policy. But by oh-so-cleverly placing the words America First in his plan's name, he probably thought he'd have no trouble picking up support in states where he had performed well in the election, or where the GOP controls the statehouse or the legislature (or both).  Except that's not what happened.  The response from South Carolina—where Trump beat Hillary Clinton by more than 14 points, and where the Trump-supporting Republican governor, Henry McMaster, routinely enjoys the cooperation of a state legislature dominated by members of his party—must have caught the president off guard. " I'm against it ," said the governor, flatly and unequivocally, back in June. His objection is shared by the mayors of Republican-heavy cities and towns up and down South Carolina's coast. It's also shared by the president of the state's Small Business Chamber of Commerce, who also leads the multistate Business Alliance for Protecting the Atlantic Coast, which represents more than 40,000 businesses that oppose the drilling leases.

Harvey throws a wrench into U.S. energy engine (Reuters) - A hurricane in the heart of the U.S. energy industry is set to curtail near-record U.S. oil production for several weeks, with the impact expected to reverberate throughout the country and across international energy markets. Harvey hit the Texas shore as a fierce Category 4 hurricane, causing massive flooding that has knocked out 11 percent of U.S. refining capacity, a quarter of oil production from the U.S. Gulf of Mexico, and closed ports all along the Texas coast. Gasoline futures jumped as much as 7 percent to their highest level in more than two years in early Monday trading in Asia as traders took stock of the storm's impact. The outages will limit the availability of U.S. crude, gasoline and other refined products for global consumers and further push up prices, analysts said. Damage assessments could take days to weeks to complete, and the storm continues to drop unprecedented levels of rain as it lingers west of Houston, home to oil, gas, pipeline and chemical plants. And restarts are dangerous periods, as fires and explosions can occur. So far, the federal government has not announced if it will release barrels of oil or refined products from the nation's Strategic Petroleum Reserve (SPR), which holds nearly 680 million barrels of oil. The SPR was established in the 1970s to prevent supply shocks in the wake of an embargo imposed by several members of the Organization of the Petroleum Exporting Countries (OPEC).

Refiners cut rates as Harvey pours on Houston - (Argus) — Roughly 13pc of US crude processing capacity cut rates or shut facilities as the remnants of a category 4 hurricane submerged the Texas coast in record flooding. Hurricane Harvey brought lashing winds and floodwaters to a region operating a quarter of US refining capacity and supplying markets far beyond state borders. At least 2.2mn b/d of crude processing cut or shut equipment while logistics infrastructure supplying crude and fuel across the eastern US and to markets overseas halted. ExxonMobil shut its 557,000 b/d Baytown refinery, the third-largest on the Texas coast, and a source familiar with operations said Marathon Petroleum reduced its 585,000 b/d Galveston Bay refinery in Texas City, the second-largest refiner in the state, to minimal rates. Shell shut its 247,000 b/d joint venture refinery with state-owned Mexican oil company Pemex in Deer Park, Phillips 66 its 247,000 b/d Sweeny refinery and Petrobras subsidiary Pasadena Refining shut its 100,000 b/d Pasadena refinery as floodwaters rose. LyondellBasell cut rates at its 268,000 b/d Houston refinery after port closures starved units of feedstocks, but said the facility had no damage. Other refiners continued to evaluate their operations and crude supplies. The reductions have strained fuel supplies into central Texas. Refiners and midstream operators must keep storage tanks full or risk their floating away. Companies use crude or products, rather than water, to keep the tanks filled and avoid quality problems. The US Environmental Protection Agency yesterday approved waivers relaxing emissions requirements for distillate and allowing winter-grade gasoline, which has an easier specification to meet. Phillips 66 shut its Pasadena refined products terminal tank farm today because of flooding that damaged at least one tank. Colonial Pipeline today said it continued to operate the earliest origin points on its 5,500-mile (8,851km) refined products pipeline system moving products through the US Gulf coast to the Atlantic coast. The company was meeting with its local staff to continue assessing conditions, a spokeswoman said.

Sabine Pass LNG output continues, minor Corpus Christi impact seen -- As the remnants of Tropical Storm Harvey continued to dump historic amounts of rain over Houston and much of the US Gulf Coast region's energy infrastructure on Monday, Cheniere Energy said its Sabine Pass LNG export terminal in Louisiana remained in operation and its Corpus Christi, Texas facility, which had been undergoing construction, so far sustained only minor damage. The Houston-based company said in a statement that initial assessments showed it has been lucky to pull through largely unscathed, even as the threat of future disruptions was real considering the track of the storm calls for punishing rain to hit southwest Louisiana in the coming days. At Sabine Pass in Cameron Parish, LNG production operations continued through the storm, Cheniere said. At Corpus Christi, only minor "cosmetic" impacts were found, the company said. "Now that the storm has passed through our Corpus Christi construction site, we are pleased to report that Corpus Christi saw no major impacts, and no interruption of LNG production at Sabine Passhas been experienced," CEO Jack Fusco said. Cheniere said it has opened an emergency office in Dallas, about 250 miles north of Houston, to support its gas supply and trading division and other essential functions to ensure it meets its production obligations at Sabine Pass. Cheniere said Friday that while Sabine Pass would continue operating during the storm, train 3 was undergoing maintenance unrelated to the storm. The full impact on production on train 3 during the work was not clear. The Sabine Pass terminal has four trains producing LNG.

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.

NYMEX oil product crack spreads soar to two-year highs on US hurricane [ Front-month NYMEX RBOB and heating oil crack spreads against NYMEX light sweet crude skyrocketed to two-year highs during mid-morning trade in Asia Monday, extending Friday's rise, amid concerns over Hurricane Harvey's impact on US Gulf Coast refining activity. Related video:Asian gasoline market assessing Hurricane Harvey's impact on supply NYMEX RBOB crack spread against NYMEX light sweet stood at $26.39/b as of 0334 GMT, while the NYMEX heating oil crack spread was at $21.87/b. Both were at highs not seen since August 2015. Crude oil futures though, were mixed. At 0334 GMT, ICE October Brent crude futures rose 21 cents/b (0.4%) from Friday's settle to $52.62/b, while the NYMEX October light sweet crude contract was down 16 cents/b (0.33%) at $47.71/b. After battering the coast and shutting some US refineries when it made landfall at Corpus Christi, Texas, late last week, Hurricane Harvey has now weakened to a tropical storm, the US National Hurricane Centre said Sunday. Roughly 2.2 million b/d of capacity were currently down or being brought down. Corpus Christi area refineries were already shut ahead of the storm, and Houston area refineries Sunday were being taken down because of flooding. "In terms of the global petroleum market, we see the impact as more of a passing ripple rather than a reason to revise the intermediate-term outlook for supply, demand, or prices," said Citi Futures energy futures specialist Tim Evans. The spread between front-month ICE Brent and NYMEX light sweet has continued to widen. As of 0334 GMT, front-month ICE Brent stood at a premium of $4.91/b over NYMEX light sweet, up 37 cents/b from Friday's settle.

Gas Station Shortages Expected In Texas As Gulf Coast Premiums Hit Record Highs According to retail fuel supplier Mansfield Oil, short-term fuel supplies for Houston and San Antonio are significantly impacted by Tropical Storm Harvey. Bloomberg reports that San Antonio and Houston supplies are at code red, while Corpus Christi was downgraded to code orange as terminals have come online already and limited spot supplies are available.For now, GasBuddy.com reports a number of stations are still open, though prices are rising... However, the Gulf Coast CBOB gasoline spread to NYMEX futures rose 9.50c to a 16.50c/gal. premium - the highest on record in data from 2012. The U.S. could see 30 percent of refining capacity shut on Harvey and if the storm moves up the Texas coast toward Louisiana, then additional shutdowns could occur in Port Arthur and Beaumont as well as in Lake Charles, Louisiana, Tudor Pickering Holt & Co. LLC analysts said. Port Arthur is home to the nation’s largest refinery operated by Motiva Enterprises LLC. “There’s a big drop-off suddenly in crude oil demand,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “We have a supply disruption event in gasoline production. Gasoline demand in the balance of the country is still elevated, so we could see a real impact on gasoline inventories if these refineries are unable to get restaffed quickly.”

Oil factbox: Refineries now facing brunt of Harvey-related flooding - Oil and gas companies on the Texas Gulf Coast were dealing Monday with the impact of Tropical Storm Harvey, which was unleashing torrential rains and flooding in the Houston area after making landfall Saturday near Corpus Christi.Roughly 2.2 million b/d of Texas refining capacity remained down, as were major ports in Corpus Christi and Houston. As of 2 pm CDT (1700 GMT), Harvey was about 40 miles east northeast of Port O'Connor Texas, with maximum sustained winds of 40 mph, according to the US National Hurricane Center. Harvey was expected to move offshore later Monday and slowly swing northeast, making landfall again Wednesday near Galveston Bay. Harvey is expected to produce additional rainfall accumulations of 15 to 25 inches through Friday over the upper Texas coast and into southwestern Louisiana," the NHC said. "Isolated storm totals may reach 50 inches over the upper Texas coast, including the Houston/Galveston metropolitan area." A state of emergency has been declared in Louisiana, although so far refiners in the area are operating normally. Roughly 2.2 million b/d of refining capacity has been shut. Houston-area refineries began shutting Sunday because of flooding. Refiners have not reported any damage so far. The following plants have been or are in the process of being shut: (Company: Location -- Capacity (b/d))

  • ExxonMobil: Baytown, TX -- 560,500
  • Valero: Corpus Christi, TX -- 293,000
  • Citgo: Corpus Christi, TX -- 157,500
  • Flint Hills: Corpus Christi, TX -- 296,470
  • Magellan: Corpus Christi, TX -- 50,000
  • Buckeye**: Corpus Christi, TX -- 50,000
  • Shell: Deer Park, TX -- 340,000
  • Petrobras: Pasadena, TX -- 112,229
  • Phillips 66: Sweeny, TX -- 247,000
  • Valero: Three Rivers, TX -- 89,000

Harvey disrupts 20pc of US refining capacity: Update (Argus) — Hurricane Harvey and its aftermath of historic flooding along the Texas coast disrupted 20pc of US refinery capacity and began cutting fuel supply to US midcontinent and southeast states. The outages cut rates on the 660,000 b/d Explorer Pipeline, which sends fuel from near Houston to Indiana, and the Colonial, moving 1.4mn b/d of gasoline and 1.1mn b/d of distillates from the Gulf coast to East coast markets. Explorer expected to run out of refined products from the Pasadena area tomorrow. Texas retailers meanwhile looked to source fuel from as far as Colorado and Georgia — a Colonial delivery point — to supply the state amid disaster work. "It is going to get that dire," said Paul Hardin, president of the Texas Food and Fuel Association. "We are definitely running out of options." Record rains in Texas shut or reduced 20pc of US refining capacity as companies today continued to manage rising waters and shrinking supplies. Flooding disrupted 3.7mn b/d of refining capacity on the Texas coast, including roughly 3mn b/d of capacity in Houston and the surrounding area. Three of the four largest US refineries, including Motiva's 600,000 b/d refinery in Port Arthur, the biggest in the nation, had reduced rates or shut outright as of today. Motiva, a subsidiary of Saudi Aramco, today confirmed that it has reduced rates by 40pc. Marathon Petroleum reduced rates at its 585,000 b/d Galveston Bay refinery, the US' third largest, according to a source familiar with operations. ExxonMobil shut its 557,000 b/d refinery in Baytown and individual units at its 348,000 b/d refinery in Beaumont, the company said. Beaumont continued to operate at a reduced capacity. 

Hurricane Harvey Throws Global Oil Markets Into Chaos - The most powerful Hurricane to hit Texas in more than 50 years has devastated much of the coast, and the historic flooding is now causing havoc in the energy markets.The rain is not over, and will over the next few days, spilling a year’s worth of rain within a week. ExxonMobil shut down its Baytown refinery, the second largest in the United States with a capacity of 560,500 bpd. Royal Dutch Shell closed its 360,000 bpd Deer Park refinery, according to S&P Global Platts, and Phillips 66 shut down its 247,000 bpd Sweeny refinery.   All port facilities in Houston and Corpus Christi were also shut down on Monday, not open to vessel traffic. That means that no refined products or crude oil will be either imported or exported for the time being.The implications of the refinery outages and the port closures could be dramatic, although how long it will last is uncertain. The first obvious effect is a disruption to the production of refined products, which could have substantial effects on the U.S. fuel supply. As of Monday morning, more than 2.3 million barrels of daily refining capacity was knocked offline, according to Reuters, or about 13 percent of the nation’s total. That has already forced gasoline futures up by 7 percent to their highest levels in two years.The effects will reverberate well outside of Texas. For example, the massive refineries on the Gulf Coast send gasoline through a major artery to the U.S. Mid-Atlantic and Northeast. The disruption will mean that much of the country could see higher gasoline prices soon. The Gulf Coast also exported 2.7 mb/d of refined products in May, much of which was sent to Latin America and Europe.In fact, as the world’s largest refined product exporter, disruptions in the U.S. will be felt around the world. “Any hiccup in U.S. refined product exports is highly disruptive to the supply chain given the dependency of nations like Mexico and other Latin American countries on the U.S.,” Michael Tran, director of global energy strategy at RBC Capital Markets, told Reuters. Worse, refined product output in Latin America has fallen recently, with Mexico and Venezuela most vulnerable to supply outages in Texas. “If there are a lot of shutdowns, whatever capacity is running will get consumed in the U.S., it will have to be, so Latin America will have to get its barrels from elsewhere. It creates a domino effect,”

Harvey’s rains shut in more U.S. refineries, sending fuel prices higher  (Reuters) - U.S. fuel prices surged on Monday as two more Gulf Coast refiners cut output and a third considered reductions, leaving more than 13 percent of the country's refining capacity offline after Tropical Storm Harvey flooded plants and shut seaports. The storm swung back over the Gulf of Mexico on Monday and was expected to bring another 10 to 15 inches (25 to 38 cm) of rain to the Houston area and up to 8 inches as far east as New Orleans, the National Weather Service said. Marathon Petroleum Corp's Galveston Bay refinery in Texas City, Texas, cut production by half, sources familiar with plant operations said. Lyondell Basell Industries' Houston refinery early on Monday also cut output by half to conserve crude supply, other sources said. Meanwhile the nation's largest plant, Motiva Enterprises' 603,000-barrel-per-day (bpd) Port Arthur, Texas, refinery was considering shutting due to high water on the plant grounds and running with essential personnel only, two sources said. The profit that refiners make per barrel of gasoline jumped as high as 21 percent in the first trading day following Harvey's landfall near Corpus Christi, Texas, late on Friday, as fears of short supplies gripped the market. Gasoline for immediate delivery in the Gulf Coast hit five-year highs, traders said, while U.S. gasoline futures RBc1 jumped as much as 7 percent to $1.78 per gallon, the highest since late July 2015. In total, 2.45 million bpd of U.S. refining capacity was shut due to Harvey, which knocked out four refineries in South Texas before bringing flooding rains to plants near Houston.

Harvey triggers spike in hazardous chemical releases - Hobbled oil refineries and damaged fuel facilities along the Gulf Coast of Texas from Tropical storm Harvey have released more than two million pounds of dangerous chemicals into the air this week, adding new health threats to Houston’s already considerable woes. The big spike in releases, which include carcinogenic benzene and nitrogen oxide, will add an environmental and long-term health risk to the region that's struggling with the massive flooding that Harvey has brought to the country’s energy capital, according to environmental watchdogs. Story Continued Below The jump in emissions has been noticed on the ground in Houston, where residents have taken to Twitter to report a stronger-than-normal chemical smell in some areas. “It’s adding to the cancer risk to the community and well as respiratory problems,” said Luke Metzger, director of Environment Texas, which has been tracking the emissions recorded by the Texas Commission on Environmental Quality for years. That level of chemicals released this week from "unplanned events," which typically exclude normal day-to-day operations, was equal to the average amount measured over a three-month period last year, he said. The reports of the pollution emissions began in earnest on Aug. 27, about a day and a half after Harvey made landfall, according to a POLITICO review of the filings.  Harvey slammed into the Houston refining belt as a Category 4 hurricane late Friday, bringing several feet of rain and strong winds. It has since crawled northeast along the Gulf Coast, damaging refinery infrastructure and forcing Exxon Mobil, Shell and other companies to halt operations, emitting hazardous gases as they shut down the vast plants that populate the Texas coast.  The Gulf Coast is home to nearly a quarter of the U.S. fuel refining output and half the country's chemical manufacturing. The storm has cut power to nearly 300,000 people in Texas, forced 13 refineries to shut down and caused another five to ramp down operations, according to the latest information from the Department of Energy.

Harvey Releases 2 Million Pounds of Pollutants From Refineries - Damage from Hurricane Harvey may have released as much as 2 million pounds of potentially hazardous airborne pollutants from oil refineries and other facilities in the Houston area, according to regulatory filings submitted to the Texas Commission on Environmental Quality. In some cases, the estimated amounts released vastly exceed legal limits — but the state agency can't confirm how many contaminants have been released because air-quality monitoring stations throughout the area were shut down prior to Harvey's landfall. Oil refineries and other facilities are required to file emissions reports estimating the amount of contaminants released into the air as soon as an event occurs.   Chevron Phillips Chemical reported that it may have released more than 745,000 pounds of contaminants into the air as it shut down its Cedar Bayou Plant in Baytown, Texas. "At this time, we can confirm that our company has safely shut down operations at our Cedar Bayou facility in Baytown" a spokesperson told NBC News. The roof of a tank at the massive Pasadena Terminal, which has 128 tanks holding petroleum products was partially submerged due to heavy rain on Sunday morning. Gasoline spilled out and more than 300,000 pounds of contaminants were released into the air, according to initial estimates by Kinder Morgan, which owns the facility. Kinder Morgan told NBC News that "the spill was contained onsite" and "appropriate regulatory agencies have been notified." ExxonMobil disclosed that hurricane damage at two of its Houston-area refineries may have released 12,000 pounds of contaminants into the air. The company told NBC News in a statement, "We have taken prompt action to respond to events and report any potential emissions as soon as we become aware." The precise quantity of pollutants released in the air is currently unknown — 24 state air quality monitoring stations across the Houston area were shut down last week in anticipation of the storm and remain offline until commission staff can safely access them. 

Surrounded by Oil Refineries, Port Arthur, Texas, Faces New Environmental Crisis Following Harvey Floods  - Democracy Now! | Video & transcript - Six days after Hurricane Harvey made landfall, the unprecedented storm is continuing to wreak havoc in Texas and parts of Louisiana. The death toll has risen to at least 38, but authorities expect it to grow as the historic floodwaters begin to recede. Early this morning, a pair of explosions rocked a chemical plant 30 miles northeast of Houston, sending thick black smoke into the air. The Harris County Sheriff's Office says one deputy was taken to the hospital after inhaling fumes, and nine others drove themselves to the hospital.  Now a tropical depression, Harvey has moved inland, but many parts of Texas remain underwater or under flood watch. On Thursday, the city of Port Arthur, Texas, which is 100 miles east of Houston, was completely underwater. AccuWeather is now projecting the economic impact of Harvey might top $190 billion -- exceeding the economic impact of Katrina and Sandy combined. Up to 40,000 homes may been destroyed and 500,000 cars totaled in the storm. According to the Red Cross, more than 32,000 people are in shelters in Texas. We speak with Hilton Kelley, the founder of Community In-Power and Development Association in Port Arthur, Texas. He is a former Hollywood stuntman turned environmental activist. In 2011, he was awarded the Goldman Prize, the world's most prestigious environmental award, for his work battling for communities living near polluting industries in Port Arthur and the Texas Gulf Coast. Port Arthur is home to the largest oil refinery in the nation -- the Saudi-owned Motiva plant, which has been shut down due to flooding.

Harvey’s Toll on Energy Industry Shows a Texas Vulnerability - — For years, much of the nation’s refinery capacity and chemical production have been concentrated along the swamps and narrow inlets of the Gulf of Mexico, risking devastation in a monster storm.The pounding being endured by coastal Texas will probably be the biggest test of that risk so far, and energy experts say it raises questions about the area’s role as a hub for such crucial and environmentally sensitive industries.“The hurricane did what terrorists could only dream of and take a third of U.S. refinery capacity off line for days on end,” said Michael E. Webber, deputy director of the Energy Institute at the University of Texas at Austin. “Over the long term, the energy sector will have to consider the costs of additional hardening of the infrastructure on the Gulf Coast versus moving to a different location like the Eastern Seaboard.” The Texas and Louisiana coasts took on their vital role because they link vast oil and gas resources, both inland and offshore, with Caribbean and Atlantic shipping channels. But the damage from Harvey, which arrived with hurricane force, has exposed a downside: vulnerability to storms that experts say are becoming more extreme because of climate change. The damage, detailed in state and federal regulatory filings, is wide ranging: escaping gasoline from a submerged roof at a Phillips 66 storage tank; a sinking tank roof at Exxon Mobil’s vast refinery in Baytown, which resulted in the release of hazardous gases including volatile organic compounds and benzene, above permitted levels; and a lightning strike that disrupted operations and led to toxic-gas releases at a Dow Chemical plant in Freeport. The full implications are potentially even larger. The environmental fallout could worsen, and if oil and natural gas prices spike because refineries and pipelines are crippled, renewable energy sources like wind and solar power, along with electric cars, could get a major lift. The United States could be forced to import more gasoline and other refined products. And a chemical industry that has been expanding rapidly because of cheap natural gas from shale fields could be slowed, or even stalled. Nearly every major Texas and Louisiana refinery has been partly or completely shut down because of damage or for safety reasons, suppressing the daily production of at least 2.6 million barrels of refined petroleum products. At least seven major refineries are out of commission, and Morningstar on Tuesday estimated that 11 more refineries, with a combined capacity to produce 1.3 million barrels per day, risked closing, including the Saudi Aramco-Motiva refinery in Port Arthur, Tex., the nation’s largest.

25 Oil Tankers Stuck In Gulf, Unable To Offload Due To Harvey Port Closures -- According to ship-tracking data compiled by Bloomberg, coupled with MarineTraffic real-time tracking, at least 25 tankers carrying almost 17 million barrels of imported crude oil are drifting near Texas and Louisiana ports, unable to offload because of closures from Tropical Storm Harvey. A Bloomberg further details, 20 Aframaxes, 3 VLCCs, 2 Suezmaxes are currently waiting off Texas ports of Corpus Christi, Freeport, Texas City, Houston and Galveston, as well as off Sabine Pass and Lake Charles, Louisiana. This is three more than the 22 ships that were "drifting" on August 28. Follows a description of the stuck tankers' cargo:

  • 6m bbl Mexican crude, including Maya
  • 4m bbl Saudi oil
  • 3.3m bbl Venezuela crude
  • 2m bbl from Iraq
  • 500k bbl Castilla from Colombia
  • 500k bbl Ostra from Brazil
  • 500k bbl Bonga from Nigeria

Additionally, here is a current status update of the various ports:

  • Corpus Christi:  Port shut since Aug. 24, sees return to normal operations by Sept. 4
  • Freeport: Port shut
  • Houston: Port of Houston still shut, no timeline for reopening
  • Sabine Pass: Sabine pilots say pass closed since 1pm local time Friday
  • Lake Charles: Port shut since Aug. 28

Runoffs and silting are major hurdle for crude oil tankers at Galveston Bay: official -- Runoff and silting of rivers and waterways flowing into the Galveston Bay still remains a concern for opening up the Houston Ship Channel and its four ports to vessels that require more draft, like Aframax and Suezmax, an official at a marine agency said Thursday. Current weather is not a concern, Michael Cunningham, director of project management with the Greater Houston Port Bureau, said in an interview. "The hydrographic surveys being currently conducted are seeking to answer that question about shoaling [silting of the waterway] and whether the draft in the waterways and alongside facilities been reduced significantly," he said. "Theoretically, an Aframax or Suezmax tanker could come into Houston right now, so long as they are not drawing more than 37 feet of water," Cunningham said. But if there has been significant shoaling, the US Coast Guard will need to determine that with a higher degree of certainty and state what size of vessels can be brought in, he said. At current drafts of 33 feet to 37 feet, most tankers -- clean or dirty -- will not be able to transit the Houston Ship Channel until the restrictions are lifted. Barges will be able to get through, but they are susceptible to fast currents, so they probably will not be moving much. The bureau is a member agency that coordinates the movement of all vessels in the Houston-Galveston marine complex, which includes Port of Houston, Port of Texas City, Port of Galveston and Port of Freeport.   The US Coast Guard has requested that surveys of the anchorages along the Houston Ship Channel be prioritized and work is underway to repair aids, lights, and ranges, the bureau said in its release Thursday.

Gas Prices Spike As Harvey Shuts Down Gulf Coast Refineries -- Gasoline prices hit two-year highs today in electronic trade after Hurricane Harvey, which reached the Texas coast last Friday, caused the shutdown of a number of refineries. Gasoline was trading at US$1.7595 a gallon, up 5.57 percent from Friday’s close, but west Texas Intermediate was down 0.55 percent to US$47.73 a barrel at 6:30 AM EDT.According to an S&P Platts report, around 2.2 million bpd in refining capacity was shut down or in the process of being shut down as of Monday morning. Refineries in the Corpus Christi area had shut down ahead of the storm, but those in the Houston area only began shutting down yesterday, prompted by the floods that Harvey brought.Among the plants being shut down was Exxon’s 560,500-bpd facility in Baytown – the second-largest oil refinery in the U.S. after Port Arthur. Shell also started shutting down its Deer Park facility, which has a capacity of 340,000 bpd, and Phillips 66 started the shutdown of a 247,000-bpd refinery in Sweeney. Texas houses some 4.944 million bpd in refining capacity. Hurricane Harvey has also disrupted imports and exports of oil and oil products, with both Corpus Christi and Houston ports closed. EIA data for May shows that Texas imported 1.9 million bpd of the total 3 million bpd that entered the U.S. via the Gulf Coast, as well as 418,000 bpd of refined petroleum products.As a result, Reuters reported earlier today, traders have approached refineries in Northern Asia seeking supplies of jet and diesel fuel. In addition, traders and refiners have provisionally reserved ships to carry gasoline and jet fuel from South Korea to the West Coast. In production, around 379,000 bpd of capacity has been idled, the U.S. Bureau of Safety and Environmental Enforcement said, which represents 21.64 percent of the 1.75 million bpd that field operators in the Gulf of Mexico pump.

Harvey knocked out 4.4 million barrels of daily oil refining capacity — sending gas prices soaring (Reuters) - Retail U.S. gasoline prices hit two-year highs and global shipping routes were scrambled as the nation's largest refiners remained shut on Friday, even as Harvey was losing strength.Major fuel pipelines feeding the U.S. Northeast and Midwest have been either closed or severely curtailed, prompting shortages in some areas and dramatic spikes in wholesale prices.The storm has roiled global fuel markets and tankers carrying millions of barrels of fuel have been rerouted to the Americas to avert shortages. European refining margins hit a two-year high on a surge in exports. The effect will continue for several weeks, if not months, after Harvey hammered the Gulf Coast for several days, causing floods that buried Houston and the surrounding area in several feet of water.   It knocked out about 4.4 million barrels of daily refining capacity — slightly more than Japan uses daily — and the signs of restarts were tentative. The nation's largest refiner, Motiva's Port Arthur facility, which can handle 600,000 barrels of crude daily, will be shut for at least two weeks, according to sources familiar with plant operations. Other plants in the Beaumont/Port Arthur area are expected to face similar challenges restarting, as the waters were in fact still rising there, even as flooding receded in Houston, some 85 miles (137 km) west. In Corpus Christi, where Harvey first made landfall a week ago, refiners Citgo Petroleum Corp, Flint Hills Resources and Valero Energy Corp were moving to restart their plants, along with the nearby Valero Three Rivers refinery, according to sources. Benchmark U.S. gasoline prices have risen more than 15 percent since the storm began, but in trading Friday the contract for October delivery lost 1 percent, the first decline in five days. September's contract had risen by 25 percent, but stopped trading Thursday.  The national average for a regular gallon of gasoline rose to $2.519 as of Friday morning, according to motorists advocacy group AAA, with even gaudier increases in the U.S. Southeast, which relies heavily on Gulf supplies. South Carolina, for instance, has seen prices rise nearly 30 cents, and prices were up nearly 20 cents in Texas, where fuel shortages were already evident.

Analyst: Harvey's Floods Could Delay 10% of US Fracking  -- As much as 10 percent of U.S. fracking work could be delayed after Hurricane Harvey ripped through southeast Texas, home to one of the nation’s busiest oilfields, according to Raymond James & Associates.More than half of the rigs running in the Eagle Ford Shale are estimated to have suspended drilling because of the storm,  Marshall Adkins, an analyst at Raymond James, wrote Thursday in a note to clients. The muddy conditions left in Harvey’s wake will add stress to the fracking services sector that has consistently lagged the faster drilling crews.Given its location in far southeastern Texas, the Eagle Ford was the only major American shale formation in the cross hairs of Harvey when it slammed ashore as a Category 4 hurricane last week. Major explorers including EOG Resources Inc. and Marathon Oil Corp. halted drilling and evacuated crews in anticipation of the storm, crimping as much as 57 percent of daily production, according to the Texas Railroad Commission.“Given that much of oil and gas activity occurs in areas only accessible via dirt roads, the heavy rainfall usually makes the movement of trucks and supplies much more difficult,” Adkins wrote. “The trucking and rail of sand, chemicals, and personnel to the well site will all take more time given the likely nasty condition of many Eagle Ford access roads.”The Eagle Ford was the only shale basin of the big four to drop activity last week, as some in the industry start to look at shale as a more expensive option compared to other places. The temporary drop in the rig count by as much as 45 rigs due to flooding could be a catalyst for higher oil prices, Adkins wrote.

US Gulf oil output rises as Harvey hits onshore: Update (Argus) — US offshore oil output continues to recover from now tropical storm Harvey as onshore producers gauge the impact on their operations. As much as 320,000 b/d of oil output, representing 18pc of the total from the US Gulf, and 615mn cf/d of natural gas, about 19pc of the total, were shut in as of 12:30pm ET today, according to the latest data from the Bureau of Safety and Environmental Enforcement (BSEE). In all, 102 platforms and five rigs have been evacuated. Yesterday, 331,400 b/d of oil output and 583mn cf/d of natural gas were shut in, with 98 platforms and five rigs evacuated. ExxonMobil said start-up operations at its Hadrian South subsea production facility in the Gulf are underway. But its Hoover and Galveston 209 platforms remain shut in. All four of BP's production platforms in the deepwater Gulf of Mexico continue to operate. Operations also continue normally at ConocoPhillips' Magnolia platform. Anadarko has resumed production at its Lucius facility. "Only Boomvang, Gunnison and Nansen in the western Gulf remain shut in until the weather permits the safe return of our personnel to these facilities," it said. In the onshore, ConocoPhillips has reopened its Eagle Ford office in Kenedy, Texas, but operations remain limited. Marathon Oil, which suspended operations in parts of the Eagle Ford basin as a precautionary measure ahead of the storm, is assessing all of its Eagle Ford locations and beginning to restart operations as access allows.

US offshore oil, gas output recovers: Update (Argus) — US Gulf of Mexico oil and gas output recovered some today as producers re-staffed platforms that they had shut ahead of Hurricane Harvey. As much as 331,400 b/d of oil output, representing 19pc of the total from the US Gulf, and 583mn cf/d of natural gas, about 18pc of the total, are shut in, the Bureau of Safety and Environmental Enforcement (BSEE) said, as 12:30pm ET today. In all, 98 platforms and five rigs have been evacuated. That compares with 378,000 b/d of oil output and 827mn cf/d of natural gas, with 105 platforms and five rigs evacuated, as of yesterday. The recovery in output may weigh on Nymex crude prices as record flooding has disrupted 17pc of US refining capacity along the Gulf coast. Nymex October crude futures fell by $1.30/bl to $46.57/bl today, while the Brent-WTI spread widened by 78¢/bl to $5.32/bl. Anadarko has returned crews to its Lucius platform in the Gulf and expects to restart production as pipelines permit. Production has resumed at its operated Constitution, Heidelberg, Holstein and Marco Polo facilities. But it will not return personnel to the Boomvang, Gunnison and Nansen spars in the western Gulf until Harvey has cleared the way for a safe return. Chevron assets in the region and the Gulf of Mexico continue to operate, it said. Apache, which has not halted any operations said, "we continue to monitor the situation and will advise on further closures as warranted." Many US oil and gas producers have shut their offices in Houston and across Texas because of the effects of Tropical Storm Harvey. BP, Chevron and Anadarko said their Houston offices will remain closed until conditions improve.

Harvey’s widespread destruction tests U.S. shale.- The tropical storm is the biggest to hit the sector since shale drilling took off a decade ago; production may be slow to bounce back.  Before Harvey made landfall as a hurricane Friday, many big shale producers in the Eagle Ford shale fields near Corpus Christi, Texas, shut down their oil and gas wells, and initial estimates for lost production were between 400,000 and 500,000 barrels a day. As the hurricane’s widespread devastation has become clearer, several analysts say it is almost certain that much, if not most, of the region’s 1.4 million barrels a day of output is shut down. Restarting wells may not guarantee that they flow at the same rate as before the storm, said Tony Sanchez, chairman of Eagle Ford operator Sanchez Energy Corp. , in an interview before the storm. While Mr. Sanchez said he didn’t expect the outages to be too extensive or last too long, he said that on a technical level he fears that shale wells, once shut off, could lose pressure. “It’s not just a matter of flipping a switch,” he said. “There is significant risk in those wells not coming back to previous levels.”

Sand mine in West Texas supports fracking in Permian Basin | The Fresno Bee: Ten miles east of this community of 6,000 sandwiched between booming West Texas oil fields, heavy trucks have begun lining up at the region's first sand mine as it churns out ammo by the ton for U.S. frackers. The Houston Chronicle reports the $325 million mine, owned by Houston sand supplier Hi-Crush Partners, is the first working plant of its kind in West Texas, and over the next 18 months, rivals including U.S. Silica Co. and Fairmount Santrol plan to build more mines that will send millions of tons of sand into the Permian Basin, allowing oil producers to circumvent expensive rail lines that transport white sand from Wisconsin, one of the costliest obstacles in West Texas. "It's going to change the landscape for us," said Chris Gatjanis, who runs the Permian Basin operations for Halliburton, the world's largest hydraulic fracturing company. "If you can cut out a piece of the cost of getting the sand to location, it makes the economics out here work better."

Sempra and Boardwalk's proposed Permian-to-Katy gas pipeline - In the short term, Permian natural gas will be dealing with the aftermath of Harvey and what it might do to associated gas production from crude oil wells being curtailed due to refinery downtime and storage capacity issues.  But that will soon be behind us, and at that point Permian natural gas production will resume its steep upward trajectory. Just a few months ago, the gas market was still sharpening pencils on potential gas takeaway constraints in West Texas, but congestion in the Waha gas market now appears as likely as another winning season for Alabama football. Where will this tide of natural gas end up? Until a few days ago, the Agua Dulce Hub in South Texas was Number 1 on the list, but a new project has thrown the Katy Hub into the mix as a potential destination. Today we analyze an interesting approach to relieving Permian natural gas market constraints. One thing we’ve yet to discuss here in the blogosphere is the potential impact of Permian natural gas arriving at the Agua Dulce Hub in 2020. Will these projects flip Agua Dulce from being short natural gas (as was our outlook in the “Miles of Texas” Drill Down series), to being long natural gas? If so, will excess gas need to flow northeast along the Texas Gulf Coast to the Katy and Houston Ship Channel (HSC) markets? Once that gas arrives in the Katy/HSC markets, will it find enough local demand? Or will it need to continue moving east into the Southeast Texas and Southwest Louisiana markets? Finally, what happens if Permian supply skips over Agua Dulce altogether and heads directly to Katy/HSC on a new greenfield pipeline? That last question is the subject for today as we look at the dynamics driving Sempra LNG & Midstream and Boardwalk Pipeline Partners’ Permian-to-Katy (P2K) pipeline open season. We will explore the other questions in a future bog series on the shifting Gulf Coast supply and demand dynamics. Sempra and Boardwalk announced a non-binding open season for the Permian-to-Katy (P2K) pipeline on August 14, 2017. The proposed 42-inch-diameter pipeline would originate at the Waha Hub in the Permian and terminate at the Katy Hub just west of Houston. Just before reaching Katy, one leg of the pipeline would head south and interconnect with various interstate pipelines before terminating at Gulf South Pipeline Co.’s Coastal Bend Header (which will supply gas to Freeport LNG) in Wharton and Brazoria counties.

Why The Shale Oil "Miracle" Is Becoming A "Debacle" - by Chris Martenson - With high net-energy, society enjoys increasing complexity and technological advances.  But without high net-energy fuel sources, our capabilities quickly regress to those of decades -- or even centuries -- past.  Which is why understanding where we truly are in the 'net-energy story' is so incredibly important. Is the US on the cusp of being "energy independent" from here on out? Is the "shale miracle" ushering in a glorious new 'boom' era that will vault America to unprecedented prosperity? No. The central point of this report is that the US is deluding itself when it comes to energy abundance (generally) and oil (specifically).  Yet that's not what we hear from the cheerleaders in the industry or in our media. From them, we hear a silver-tongued narrative of coming riches -- a narrative that contains some truth, some myth, and a lot of fantasy.  The bottom line is this: The US shale industry resembles a fraudulent Ponzi scheme much more so than it does any kind of "miracle". How do I know that?  Because, collectively, US shale companies have lost cash in every year of their existence.  The burned through cash when oil was $100 -- and again when it was $90, $80, $70, $60, $50, $40, and $30 a barrel.  They burned through cash in 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 and 2016. You don’t have to be a finance guru to appreciate or understand that any industry that persistently burns through cash is a bad deal.  Especially one whose prime product – shale wells – principally deplete (-85%) in roughly three years.  If you’ve been in business for 9 years drilling wells that mostly run out in 3 years, and you haven’t managed to produce positive cash flow at any point along the way, then it's time to admit that your business model simply doesn’t work.  As even The Economist magazine recently noted: But the fact that the industry makes huge accounting losses has not changed. It has burned up cash whether the oil price was at $100, as in 2014, or at about $50, as it was during the past three months.  The biggest 60 firms in aggregate have used up $9bn per quarter on average for the past five years. As a result the industry has barely improved its finances despite raising $70bn of equity since 2014. Much of the new money got swallowed up by losses, so total debt remains high, at just over $200bn. (Source)  Let’s run that math. Five years is 20 quarters. That times $9 billion/quarter is $180 billion dollars in cumulative operating losses. This begins to give us a sense of the magnitude of losses investors will face when the music finally stops.

Energy trade groups get say on potential pipeline shutdown  (AP) — A federal judge deciding whether to shut down the four-state Dakota Access oil pipeline while more environmental review is done is allowing national energy and manufacturing trade groups to have a say. U.S. District Judge James Boasberg, in Washington, D.C., granted the request Friday, just days before Monday’s final deadline for all parties involved in the legal dispute to weigh in with arguments. The Standing Rock Sioux and three other American Indian tribes in the Dakotas have been fighting the pipeline for more than a year, arguing that the $3.8 billion project built by Texas-based Energy Transfer Partners threatens cultural sites and tribal water supplies. The company disputes that and maintains the pipeline is safe. After months of delays, it began moving North Dakota oil through South Dakota and Iowa to a distribution point in Illinois on June 1. However, Boasberg later that month ordered the Army Corps of Engineers, which permitted the project, to further review the pipeline’s impact on the Standing Rock tribe. The judge is deciding whether to shut down the pipeline until the completion of the work, which is expected to take several more months. Groups including the American Petroleum Institute, American Fuel and Petrochemical Manufacturers, Association of Oil Pipe Lines, national Chamber of Commerce and National Association of Manufacturers asked to submit their stance on the matter. They maintained in court documents that ceasing pipeline operations “would have serious adverse economic impacts throughout the oil industry and local and regional economies.” Boasberg gave his approval in a one-sentence statement without providing details on his reasoning. Standing Rock attorney Jan Hasselman on Monday said the tribe doesn’t object because “everybody who wants to be heard should be heard.”

Tribes say Dakota Access pipeline overstates shutdown impact - ABC News: American Indian tribes hoping to persuade a federal judge to turn off the Dakota Access oil pipeline maintain in last-minute court filings that the project's developer has overstated the potential impacts of a shutdown. Standing Rock Sioux attorney Jan Hasselman and Cheyenne River Sioux attorney Nicole Ducheneaux also argue that Texas-based Energy Transfer Partners brought potential problems on itself by forging ahead with construction despite the uncertainty of final federal approval. ETP "made reckless choices, and it must accept the consequences," the attorneys wrote in documents filed Monday, the deadline for arguments imposed by U.S. District Judge James Boasberg in Washington, D.C. The $3.8 billion pipeline began moving North Dakota oil through South Dakota and Iowa to Illinois on June 1, after President Donald Trump pushed for its completion. The Army Corps of Engineers, which permitted the project, had decided to do more environmental study, but dropped that plan after Trump took office. The judge ruled in June that the Corps didn't adequately consider how an oil spill under Lake Oahe in the Dakotas might affect the Standing Rock Sioux, one of four tribes that have challenged the pipeline in court. He ordered the Corps to reconsider certain areas of its environmental analysis, and could decide to shut down the 1,200-mile pipeline while this work is done over the next several months.

Oil Firms That Cheered Regulatory Rollback Are Quaking Over Nafta -  The Trump administration is easing environmental regulations and opening up territory for drilling as part of the president’s bid to unleash the "vast energy wealth" of the U.S. Yet Donald Trump’s push to rewrite the North American Free Trade Agreement could have the opposite effect.As Nafta negotiations resume Friday, oil industry leaders are desperate to preserve the 23-year-old trade deal that drove a North American oil and gas renaissance and paved the way for $34 billion worth of energy exports to Canada and Mexico last year."Any changes that disrupt energy trade across our North American borders, reduce investment protection or revert to high tariffs and trade barriers that preceded NAFTA could put at risk the tens of millions of jobs," said the top oil and gas trade groups from the U.S., Canada and Mexico in a joint position paper released last month.Energy companies that sat on the sidelines during other recent trade negotiations are getting more involved on Nafta -- securing formal roles on committees advising the process, unleashing lobbyists to influence it and outlining their priorities for the administration. Armed with a modest wish list, the industry is mostly in a defensive posture, terrified Trump will torpedo the current deal or weaken existing provisions that allow investors to sue countries over discrimination, seizures and other injustices.“We want to make clear in a thoughtful way that there’s really no reason to disrupt the energy component of Nafta,” American Petroleum Institute President Jack Gerard said in an interview. “Over time, this has really evolved to a very efficient marketplace in North America with Canada, Mexico and the United States. It’s a mature system that’s well in place, and they’re just no reason to disrupt it.”

Canadian oil pipeline protesters launch new battle from the water (Reuters) - On a sparsely populated island off the coast of the northwestern United States, more than a hundred environmental activists gathered last weekend to practice seaborne drills to disrupt construction on Kinder Morgan Canada Ltd's Westridge crude oil terminal. In kayaks and sailboats they practiced forming blockades, raising banners and rescue techniques. Sunday culminated in a mass role play in which kayakers blockaded a large vessel and unfurled banners emblazoned with "Stop Kinder Morgan" while pretend law enforcement boats circled around creating noise, waves and simulating arrests. The three-day camp on Lopez Island in Washington state's San Juan archipelago marks the opening of a new front in the campaign to stop Kinder Morgan's Trans Mountain pipeline expansion, a C$7.4 billion ($5.90 billion) project through British Columbia that gained Canadian government approval last year. The proposed project would triple capacity on an existing pipeline and transport 890,000 barrels per day of crude from northern Alberta's oil sands to Westridge docks in the Port of Vancouver for loading onto tankers bound for refineries as far afield as Asia. Activists aim to halt building work scheduled to start next month at Westridge terminal, located about 50 miles (80 km) north of Lopez Island, by launching a campaign from the water. Westridge is one of a handful sites along the pipeline owned by Kinder Morgan and protected by 10-foot-high (3m high) chain link fencing and security guards. The pipeline is fiercely opposed by groups concerned it will accelerate oil sands development, worsen climate change and increase the risk of an oil spill in the waterways around British Columbia and Washington known as the Salish Sea. Canada is home to the world's third-largest crude reserves but has limited pipeline capacity to transport its oil from landlocked Alberta to international markets. Delays to building new export pipelines, like TransCanada Corp's Keystone XL project, have contributed to a sharp pullback in international investment as companies fret about lack of market access weighing on Canadian crude prices.

Harvey sends gasoline prices climbing, deepens Venezuela's suffering -- Hurricane Harvey’s strike at the heart of the U.S. oil and gas industry caused backups throughout the petroleum system on Monday, from storage tanks in Cushing, Okla. to tankers waiting for gulf ports to reopen, and set U.S. gasoline prices soaring to the highest levels in two years. The shutdown of about 2.2 million barrels, or 12 percent, of U.S. refining capacity has driven gasoline prices up as much as 6.8 percent since Friday. Prices eased off later in the day, however, finishing up 4.4 percent and up about 8 percent in the past week. Analysts said that the coming end of the summer driving season and substantial inventories of gasoline and diesel would help dampen any price increase from Harvey. Huge disruptions remain. The massive rainfall has restricted ship traffic in ports all across the Texas Gulf Coast from Corpus Christi to the Sabine Pass, with further restrictions likely in Louisiana as the storm crawls to the east. The ports of Lake Charles, La. and neighboring Port Arthur, Texas were closed to inbound traffic Monday, according to the US Coast Guard.  Bloomberg News reported that 14 tankers were in a logjam waiting to deliver crude oil. The Port of Freeport was losing some of its water depth as silt washed from the bay was building up, according to S&P Platts, an analysis firm. Robert McNally, president of the Rapidan Group, a consulting firm, said that the storms brought to a halt imports of crude oil from and exports of gasoline to Venezuela, putting more pressure on the country’s economy and fueling more disarray there. He noted that the Trump administration has been reluctant to impose oil sanctions on Venezuela. “That debate just got resolved,” McNally said, “and it will add pressure on Venezuela as long as this lasts.”

Trump exempts Citgo from Venezuela sanctions | TheHill: President Trump is exempting Citgo Petroleum Corp., owned by Venezuela’s government, from the financial sanctions imposed Friday on the country. The latest set of sanctions is meant to punish the government of President Nicol├ís Maduro as it moves to rewrite the country’s constitution and consolidate his power. To that end, the sanctions seek to exclude the Venezuelan government from the United States’ economy, including its markets and capital, and to make sure the U.S. does not assist the Maduro government. But Citgo, an oil refiner, retailer and transporter based in the United States and owned by the government’s Petr├│leos de Venezuela, will get to operate largely as normal. The White House statement announcing the sanctions framed the Citgo exemption as an attempt “to mitigate harm to the American and Venezuelan people.” Petroleum imports and exports are also exempt, a nod to the significant petroleum trade between the United States and Venezuela. “We are issuing general licenses permitting transactions that would otherwise be prohibited under the executive order,” Treasury Secretary Steven Mnuchin told reporters Friday. “These include a 30-day wind-down period, the financing for humanitarian goods to Venezuela and certain dealings in specific debt instruments that trade on secondary markets, and certain dealings with U.S. entities owned or controlled by the government of Venezuela. Also, the executive order carves out short-term financing for most commercial trade, including the export and import of petroleum.” Nonetheless, Citgo will not be allowed to send profits to its Venezuelan parent. 

Total's Application to Drill Near Amazon Reef Rejected - Brazil's environmental agency (Ibama) rejected Tuesday the application for a license to drill in the mouth of the Amazon Basin by the French company Total (operating in a joint venture with BP). This is an important step towards defending the Amazon Reef ; a unique and largely unexplored ecosystem—Total's closest block is only 8km away from the reef. In a statement published Tuesday, Ibama's president, Suely Araujo, said that Total had not provided adequate information about the environmental impact of the project, making it impossible to grant the license. The company admits in their own Environmental Impact Assessment (EIA) that there is a 30 percent probability of oil reaching the reef in case of a spill. Among the many flaws on Total´s Environmental Impact Assessment, Ibama listed, the oil dispersion modeling and potential cross border risks to French Guiana, Suriname, Guyana, Venezuela and Caribbean archipelagos. The note also highlights the lack of information about possible impacts to the welfare of mammals, turtles and birds that live in the region. The company still has another chance to send additional documentation as requested by Ibama. "This will be the third and last time that the agency is willing to allow Total to provide adequate information about the environmental impact of the project. If Total does not adequately address the outstanding requests from the technical team, the licensing process will be finally archived ," said Suely Araujo, Ibama's president.  "After two years and multiple unanswered questions, Total has failed to meet the demands of the regulator, Ibama," Helena Spiritus, Greenpeace Brazil energy campaigner, said. "They have shown they are incompetent and not fit to drill anywhere near the Amazon Reef. Ibama shouldn't give them another chance to threaten this precious ecosystem."

Campaigners seeking to overturn fracking decision face wait for court ruling (From The Argus): Campaigners fighting to overturn a Government decision to approve a fracking site in Lancashire face a wait to see if they have won the latest round of their legal battle. At the end of a two-day hearing in London, three Court of Appeal judges reserved their decision in challenges brought by the Preston New Road Action Group (PNRAG) and environmental campaigner Gayzer Frackman, from Blackpool. A ruling will be given in the case by Lord Justice Simon, Lord Justice Lindblom and Lord Justice Henderson on a date to be fixed. The appeal proceedings followed a defeat for protesters at the High Court in April when they failed to persuade a judge in Manchester that the decision to grant a planning application for the site in Fylde was not fair or lawful. UK energy company Cuadrilla’s planning application was refused by Lancashire County Council in 2015 but later granted following an appeal and a planning inquiry. The scheme was given the go-ahead in October by Communities Secretary Sajid Javid. During the latest hearing, David Wolfe QC, for the action group, submitted that “the Secretary of State, through his inspector, misunderstood key local and national planning policies”. The judges have been urged to “set aside” the ruling of Mr Justice Dove in the High Court and to “quash the Secretary of State’s decision”. Argument was made on behalf of both the Communities Secretary and Cuadrilla that the challenges by PNRAG and Mr Frackman should be dismissed. 

Harvey hits flow of distillates from US Gulf to Europe -- The stream of distillate cargoes from the US Gulf Coast to Northwest Europe and the Mediterranean has all but halted in the last eight days as tropical storm Harvey forced the closure of terminals, ports and refineries in addition to disrupting market flows. Only one vessel was seen to leave the USGC to land across the Atlantic in the last eight days, according to data from S&P Global Platts trade flow software cFlow. The Medium range tanker Isola Blu is en route to Amsterdam. However, it may not end up there as cargoes are likely to be diverted to Latin America given the disruption. Cargoes frequently get bought and sold after loading and some are diverted in order to fill unexpected shorts. The Overseas Milos is now just outside of Curacao off the coast of Venezuela having previously been on course to Le Havre in France. Total arrivals from the USGC are now only at 320,000 mt, which has caused the ICE low sulfur gasoil futures spread to move definitively into a backwardation of around 75 cents/mt Tuesday after being mostly flat Friday, according to ICE data. The break in supply is likely to support the NWE and Mediterranean diesel markets. However, given the disruption, there was talk of a possible reverse arbitrage from Europe to the US emerging, according to sources, but so far there was scant evidence of this. The possibility of Europe supplying Latin America is perhaps the more likely outcome initially, but so far market participants were holding off for the further clarification on the situation in the US. "People are starting to sniff for Latam, but nothing has been really done. Everyone is waiting for the US to open it seems," a source said.

Sep Eagle Ford crude oil delivery to S Korea delayed 1-2 weeks on Hurricane Harvey - Various Northeast Asian end-users are bracing themselves for possible lengthy delays in the delivery of North and Central American crude oil supply amid recent onslaught of Hurricane Harvey, with three South Korean refiners expecting to receive cargoes from the US and Mexico behind their initial September schedule, market sources said Tuesday. At least two South Korean and one Chinese refiners 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, a North Asian crude trading manager with knowledge of the matter told S&P Global Platts. "South Korean companies have lots [of logistics matters] to sort out now ... for what we know as of now, the delays could be as short as one week to as long as a couple of weeks," the trade source said. Meanwhile, one South Korean refiner said it had not purchased any US crude barrels for loading in late August and September, though the firm is also expecting around one week of delay in the delivery of its September Mexican term supplies which include Isthmus and Maya crude. Overall, numerous tornado warnings and the prospect that massive flooding in virtually every corner of the nation's fourth-largest city could last at least several more days -- exacerbated by two swollen reservoirs that were being slowly released to avoid an even greater catastrophe -- complicated workers' efforts to assess damage to key energy infrastructure and determine when operations can return to normal.

China Becomes World’s Third-Largest Shale Gas Producer - China has become the world’s third-largest shale gas producer, after only the U.S. and Canada, Iran’s PressTV reports, adding that last year, China pumped almost 8 billion cubic meters of shale gas. The annual result was a 76.3-percent improvement on 2015, China’s Ministry of Land and Resources said – a record amount. Investments in shale gas exploration reached US$1.3 billion.Shale gas production in China has continued to grow this year, as it seeks to move away from crude oil and bets increasingly on gas as the cleaner fuel amid government efforts to reduce pollution levels.Earlier this month, the Ministry announced it will be opening two more production bases for shale gas in the south of China, and it will also schedule more oil and gas exploration tenders. The two bases will be in the Guizhou province and Hubei province. The tender for the US$193-million Guizhou development project took place on August 18 and the winner was a local company, Guizhou Industry Investment (Group) Co.China has significant shale gas reserves, but they are located in geologically challenging areas, there is no developed production and transportation infrastructure, and exploration rights are limited, as Bloomberg wrote last year. As of the end of 2015, recoverable shale gas reserves stood at 130 billion cu m, compared with 5.19 trillion cubic meters of conventional gas.  One of the largest shale gas deposits in the country is the Fuling field, with proven reserves of 600.8 billion cubic meters. This year, however, Beijing announced plans to increase the proven reserves of shale gas in the country to more than 1.5 trillion cubic meters by 2020. This would involve some major investment in recovery technology as well as infrastructure. Production is also slated to expand to 30 billion cubic meters by 2020, according to the Ministry, and further to 80-100 billion cubic meters by 2030.

China-owned oil company cozies up to Washington | TheHill: -- The Washington office of a Chinese state-owned oil company has turned to K Street to help it connect with the U.S. government amid tough talk on trade from President Trump. The work to represent the “myriad of interests” of Sinopec Group actually began in May 2016 — before Election Day — but paperwork only recently appeared in a Justice Department disclosure database. The contract appears to have been extended another year, until May 2018. Sinopec is paying $32,000 per month. The effort includes Mark Cowan, a former CIA officer who held executive branch posts in three GOP presidential administrations, and Lynn Tian, the chairman of Sinowind Technologies who helped found the Asian Republican Coalition. Documents say they are handling the day-to-day management and coordinating the team’s overall efforts, respectively. Cowan formed Cowan Strategies in 2013 and Tian runs Global Strategies, Ltd. Both firms report working on the contract. Other lawyers and lobbyists — primarily from Patton Boggs, which has since merged to become Squire Patton Boggs — appear to round out Sinopec's team. The firm, and Cowan, have both represented the Chinese government and the China Chamber of Commerce, which is part of China’s Ministry of Commerce. Squire Patton Boggs still represents the Chinese government, in addition to public relations firms MSLGroup and BLJ Worldwide.

The World Eyes Yet Another Unconventional Source of Fossil Fuels - Yale E360: In May of this year, China claimed a breakthrough in tapping an obscure fossil fuel resource: Researchers there managed to suck a steady flow of methane gas out of frozen mud on the seafloor. That same month, Japan did the same. And in the United States, researchers pulled a core of muddy, methane-soaked ice from the bottom of the Gulf of Mexico. The idea of exploiting this quirky fuel source would have been considered madness a couple of decades ago — both wildly expensive and dangerous. Until recently, methane-soaked ice was considered explosively unstable. In the Gulf of Mexico, traditional oil rigs have been tiptoeing around these icy deposits for years, trying to avoid them. “These deposits have been a pain in the neck for oil exploration,” says Scott Dallimore with the Geological Survey of Canada. Accidentally melting deposits overlying traditional oil and gas fields could cause drilling infrastructure to collapse, or pipes to clog up with ice.Now the tide has started to turn, as studies of the frozen gas have quelled some of the bigger fears. “We always used to think of these as explosive and dangerous — they’re not,” says Dallimore, who is involved with Canada’s explorations of these deposits. These reassuring findings, combined with rising energy demands, have spurred some countries — especially fossil fuel-poor nations like India and Japan — to think seriously about commercial extraction. But there are still concerns about the wisdom of mining this unexplored corner of the fossil fuel landscape, including the possibility of triggering underwater landslides, unleashing tsunamis, disturbing ocean ecosystems, and — most important of all — more than doubling the planet’s natural gas supplies and the planet-warming emissions that go along with them. So is drilling for methane hydrates really a good idea? 

Libya's oil disruptions widen as two more fields halt output - Two more oil fields in Libya are being closed after an armed group took over pipelines to both deposits, further disrupting the OPEC nation’s plan to boost crude production. El Feel, or Elephant, stopped production, Wessam Al-Messmari, an office manager for the Petroleum Facilities Guard that is protecting the field, said Sunday by phone. State-run National Oil Corp. declared force majeure at the deposit, according to a person familiar with the situation who asked not to be identified because the information isn’t public. The Hamada oil field will gradually stop pumping through Monday because of the pipeline closing, Arabian Gulf Oil Co. spokesman Omran al-Zwai said Sunday. Force majeure was also declared on Hamada, he said. Force majeure is a legal clause protecting a party from liability if it can’t fulfill a contract for reasons beyond its control. An armed group closed the pipelines to Hamada and El Feel, according to a person familiar with the situation. Libya revived its oil production and exports before the recent disruptions. In July, crude production was at a four-year high and exports were the most in three years, according to data compiled by Bloomberg. While the expansion has helped Libya’s oil-dependent economy, the Organization of Petroleum Exporting Countries is trying to cut global supplies. That effort has been undermined by recovering output at OPEC members Libya and Nigeria. Libya’s biggest field, Sharara, has been shut for about a week after an armed group closed the pipeline that linked the deposit to an export terminal, Al-Messmari said at the time. The field is still not pumping, a person familiar with the matter said Sunday. Libya, which holds Africa’s largest crude reserves, pumped 1.02 million barrels a day in July. It was producing 1.6 million barrels a day before a 2011 revolt set off years of fighting between rival governments and militias.

Fracking a potential 'game-changer' for South African economy - Hydraulic fracturing (fracking) could be a “game-changer” for South Africa’s economy, Academy of Science of South Africa (ASSAf) VP Professor Barney Pityana said on Thursday.Addressing delegates at a national shale gas conference, hosted by ASSAf in partnership with the Department of Science and Technology, in Port Elizabeth, he said fracking also had the potential to make a major contribution to South Africa reaching its commitments in terms of climate change, by limiting the country’s reliance on coal as an energy source. Limiting the country’s reliance on importing oil in an increasingly uncertain global climate, he added, was also crucial. “The development of diverse sources of energy is critical for any developing economy. South Africa is dependent on oil and gas imported from a variety of countries. Such dependence carries risks, including the uncertainties of the market and the political situations in an ever-changing world,” he noted. Pityana pointed out that South Africa had considerable shale gas reserves in the Western, Northern and Eastern Cape, adding that there were economically viable and advanced extractive technologies available for South Africa to develop a fracking industry.“Nonetheless, the extraction and development of the industry must be undertaken with caution,” he cautioned.Pityana noted that the concerns around fracking included the potential effect on underground water resources in an already water-scarce country and the negative effect on the environment, including human habitation and the habitats of plants and wildlife.

What's Next For Oil: Interview With Former DOE Chief Of Staff -- (interview & transcript) In this week's MacroVoices podcast, Erik Townsend and Joe McMonigle, former chief of staff at the US Department of Energy, discuss the state of the global energy market, and OPEC’s rapidly diminishing ability to control oil prices. McMonigle believes investors will be hearing more jawboning from the Saudis, OPEC's de-facto leader, over the next two weeks as they try to marshal support for extending the cartel's production-cut agreement past a March 2018 deadline. Of course, anyone who’s been paying attention knows the cuts have done little to alleviate supply imbalances that have weighed on oil prices for years. In a report published by the International Energy Agency earlier this month, the organization notes that non-compliance among OPEC members, and non-members who also agreed to the cuts those non-members who also agreed to cut oil production, increased again in July. According to the IEA data, non-compliance among the cartel’s members rose to 25 percent in July, the highest level since the agreement was signed in January. Meanwhile, noncompliance for non-members rose to 33%. Given that oil prices have fallen since OPEC members and non-members first agreed on the cuts last November, the Saudi's might have difficulty convincing their peers that the cuts are having an impact, other than allowing US shale producers to flourish. OPEC will meet Nov. 30 in Vienna.

Harvey may succeed where OPEC has struggled by boosting oil prices - (Reuters) - Hurricane Harvey may achieve in global crude oil markets in a few days what OPEC and its allies have struggled to achieve in months - a tightening of supplies and a rise in prices.   Harvey, which has been downgraded to a tropical storm, hit the coast of Texas on Friday as the most powerful hurricane to hit the U.S. state in more than 50 years, causing widespread damage and flooding. The region where the storm struck is home to some 2.2 million barrels per day (bpd) of refining capacity as well as being a major shipment point for both imports and exports of crude oil and fuel products. The refining capacity that has been idled because of the storm is about 11.2 percent of the U.S. total, and the immediate impact is being felt in gasoline prices. Benchmark U.S. gasoline futures jumped as much as 6.8 percent in early trade on Monday in Asia to touch $1.7799 a gallon. Brent crude, the global oil benchmark, rose as much as 0.8 percent in early Asian trade, reaching as high as $52.84 a barrel. So far, this would imply the crude market is fairly relaxed about the impact of Harvey, but it's possible the effect of the storm will travel far beyond U.S. gasoline prices, given the United States' status as an emerging power in crude and refined product exports. It has been U.S. shale oil output that has largely frustrated efforts by the Organization of the Petroleum Exporting Countries (OPEC) and their allies to drive crude prices higher this year by restricting their own production. While much of the offshore crude production in the Gulf of Mexico was shut in ahead of Harvey's passage, the yet to be quantified damage from the storm may lie with the onshore, shale oil output that was in the storm's path. The Eagle Ford shale basin lies in the path of the storm and producers in the region have idled production.

Gasoline Spikes To 7-Month Highs After Harvey; Heating Oil, Crude Jump --The entire energy futures complex is notably higher at the open with RBOB Gasoline spiking over 4% to its highest since January amid the carnage of Hurricane Harvey. Bloomberg reports that Harvey, the strongest storm to hit the U.S. since 2004, made landfall as a Category 4 hurricane Friday, with torrential rain flooding cities from Corpus Christi to Houston and shutting plants able to process some 2.26 million barrels a day of oil. Major terminals and pipelines that move crude and fuel into and out of Houston-area refineries were also shut, potentially stranding some crude in West Texas and starving New York Harbor of gasoline.“Gasoline prices are going to continue to rise this week as we expect another three days of rain in the Houston area,” Andy Lipow, president of consultant Lipow Oil Associates LLC in Houston, said by telephone."With pipeline operators beginning to shut down their crude oil and refined product infrastructure, I expect to see further curtailment of refinery operations, resulting in less product being available. A spike in gasoline and diesel prices will drag up crude oil prices.”WTI is also higher as ~378.6k b/d of oil output from Gulf of Mexico is shut. Pushing RBOB Gasoline and WTI higher...

"Oil Markets Roiled": Goldman Calculates The Impact From Harvey's "Devastation" -- Oil markets were roiled, sending gasoline prices surging on Monday after Tropical Storm Harvey wreaked havoc along the Gulf Coast over the weekend, crippling Houston and its port, and knocking out numerous refineries as well as some crude production. As noted on Sunday, gasoline prices hit two-year highs as massive floods caused by the storm forced refineries in the area to close. Meanwhile crude futures fell as the refinery shutdowns could reduce demand for US crude production. As a reminder, Texas is home to 5.6 million barrels per day (bpd) of refining capacity, and Louisiana has 3.3 million bpd. Over 2 million bpd of refining capacity was estimated to be offline as a result of the storm. While the U.S. National Hurricane Center said Harvey was moving away from the coast, it was expected to linger close to the shore through Tuesday, and that floods would spread from Texas eastward to Louisiana. As Reuters reports, US traders were seeking oil product cargoes from North Asia with transatlantic exports of motor fuel out of Europe expected to surge. “Global refining margins are going to stay very strong,” said Olivier Jakob, managing director of Petromatrix. “If (U.S.) refineries shut down for more than a week, Asia will need to run at a higher level, because there’s no spare capacity in Europe.”

Oil markets hit by Storm Harvey; U.S. dollar slips (Reuters) - U.S. crude oil futures fell on Monday but gasoline prices surged to 2-year highs as Tropical Storm Harvey kept hammering the U.S. Gulf Coast, knocking out several refineries, which backed up crude supplies and disrupted fuel production. The U.S. dollar dropped to its lowest in roughly 16 months against a basket of major currencies and a more than 2-1/2-year low against the euro, following comments from central bankers on Friday and worries over the storm hurting the U.S. economy. Harvey made landfall in Texas late on Friday as the most powerful hurricane to hit the region in more than 50 years and caused large-scale flooding, forcing refineries in the area to close. U.S. crude futures fell as the refinery shutdowns could reduce demand for American crude. "The reduced inputs to those Gulf refineries will result in an increase in crude inventories," said Tony Headrick, energy market analyst at CHS Hedging. "That outweighs the outages in crude oil production from the storm." U.S. crude settled down $1.30, or 2.7 percent, at $46.57 a barrel. The refinery shutdowns sent U.S. gasoline prices soaring. Spot prices for U.S. gasoline futures surged 7 percent to a peak of $1.7799 per gallon, before easing to $1.7233. In the U.S. equity market, energy and bank shares weighed on the Dow and the S&P 500. "There tends to be initially a knee-jerk reaction and people react to the human side and the energy disruption but that eases soon," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

Oil Tumbles Amid Speculation Up To 30% Of US Refining Capacity Could Be Shut -- WTI tumbles below $47 as negative sentiment about excess crude supply in light of extended refiners shutdowns grows, and Wall Street piles on with more detailed estimates about Harvey's impact on US oil and refinery production. As oil slides, crack spreads have stabilized near the highs of the session, on concerns about gasoline availability, with Tudor Pickering saying that crack spreads could continue to rise in coming weeks in other U.S. regions served by the Gulf Coast refining center. As reported earlier, about 15% of U.S. refining capacity was offline Monday morning as the remnants of Hurricane Harvey continued to pound Texas and the Gulf Coast. Furthermore, the reason why oil is rapidly sinking is that according to Goldman (and others) estimates, Harvey's impact would be to significantly increase domestic crude availability by 1.4 million barrels every day, while removing 615-785 kb/d of gasoline and 700 kb/d of distillate supplies. And while some of the biggest refining companies in the world were affected, analysts expect shares of refiners to rise this week on wider crude differentials and stronger crack spreads. Mid-continent refiners like Delek US Holdings Inc. and Holly Frontier Corp. may be best positioned to outperform, and PBF Energy Inc. could also benefit given its exposure to the northeast. Here is Bloomberg's summary of why while it expects further pain for oil bulls, Wall Street is now bullish on refiners: Tudor Pickering:

  • If Hurricane Harvey moves up the Texas coast toward Louisiana then additional shutdowns could occur in Port Arthur, Beaumont and Lake Charles, with up to 25-30% of U.S. domestic refining capacity could be shut near term
  • Crack spreads could continue to rise in coming weeks in other U.S. regions served by the Gulf Coast refining center
  • Estimated supply disruptions will be in 1-2 week range
  • See 400k b/d Gulf of Mexico oil production impact, to last days not weeks; +300k b/d of Eagle Ford production impact will only last days

Early estimates of Harvey’s economic impact --Given that the rains have not yet ended, these first estimates of Harvey’s potential macroeconomic impact should be accepted cautiously. We’ll be paying attention throughout the week for meaningful updates. 1) From the RBC commodity strategy team, a look at the potential effect on the oil market: The impact of a storm of such magnitude and trajectory is fluid and has wide ranging implications for the oil market. While several regional refineries have reported no substantial damage from the storm, assessments of oil refineries and infrastructure are ongoing and the impact of the storm could be felt long after its passing in the event of extensive damage. At initial glance, the development is bearish for crude oil from a demand perspective given that some 2 mb/d of refining capacity remains shut. This has, tangentially, also spurred a knee jerk price spike higher for refined products. Prompt month gasoline cracks have surged 25% since last Wednesday’s close en route to multi-year highs. The Texan Gulf Coast comprises nearly 27% of total US refining capacity. Further details surrounding the status of localized refineries will dictate the extent and tenor to which refined product prices remain elevated. While pockets of the Eagle Ford and US offshore production has been curtailed or suspended for preventative measures, hurricanes are not as bullish from a supply disruption standpoint as in years past. A decade ago, prior to the US shale revolution, the Gulf of Mexico made up a larger percentage of total US oil production (closer to 30% vs current levels near 15%). Simply put, there are fewer barrels at risk from an aggregate percentage of US production. In fact, many US offshore Gulf of Mexico barrels have been exported to Asia this year. While it is premature to rule out damage to elements impacting production, a growing source of US crude imports have come from Canada rather than waterborne routes.

IEA says no need for oil release after Harvey - (Argus) — The IEA says it does not need to release oil from emergency reserves because markets remain "amply supplied" even after Hurricane Harvey disrupted energy operations in Texas and the US Gulf of Mexico.The IEA says it is closely monitoring the situation after the Category 4 hurricane struck the coast on 25 August. But it says crude and product stockpiles in the US and around the world are still "well above" the five-year average, reducing the need to organize a response from member countries."It is too soon to know how long oil production and refining operations will be disrupted, or the extent of the damage. However, for now, the IEA does not see a need to act as the market is amply supplied," IEA said.IEA says it is reviewing the situation and "stands ready to act as required." IEA member countries that are net oil importers are required to hold the equivalent of 90 days of imports, and the organization can order a coordinated release of those reserves in response to major supply disruptions.Offshore oil production in the US Gulf of Mexico is down by about one-fifth, or 379,000 b/d, as companies temporarily closed wells because of the storm, according to the US Bureau of Safety and Environmental Enforcement. US refiners in Texas have cut processing rates or closed facilities as the hurricane has strained operations.President Donald Trump's administration has yet to order any emergency crude release from the US Strategic Petroleum Reserve, which holds 678.9mn bl of sweet and sour crude at storage sites in Texas and Louisiana. The reserve has a maximum drawdown capacity of 4.4mn b/d, but test sales have revealed transportation bottlenecks near the storage sites

The Upcoming Oil Price Rebound - Oil prices sank on Monday as Hurricane Harvey devastated Houston and other parts of the Texas coast. The outage of key oil ports have disrupted shipments, leaving Texas shale drillers without a destination for their crude. The fear is that oil supplies will build up within Texas, which is why crude prices sank. The flip side is that the refinery outages have caused gasoline prices to skyrocket, opening up a wide crack between crude and products prices. An estimated 2.3 mb/d of refining capacity has been shut down temporarily, with major refineries such as ExxonMobil’s massive Baytown complex shuttered. Royal Dutch Shell, Phillips 66, Chevron and others also shut down refineries. Gasoline from Texas supplies much of the U.S. East Coast, but it also supplies Latin America and Europe, so the outages will be felt around the world. As for crude, the refiner closures mean demand will take a temporary hit, and plunging oil prices in the last few days reflect that. The rain is expected to continue through much of this week. An estimated 20 percent of the Gulf of Mexico’s offshore oil production was sidelined from the storm, or roughly 400,000 bpd. The outages offshore aren’t expected to last very long.    An oil drilling ship sank in the port of Corpus Christi, blocking the ship channel. The drill ship, owned by Paragon Offshore, could delay reopening of the port. Corpus Christi has grown in importance recently because the volume of crude oil exports leaving the U.S has exited through the city’s port.. ExxonMobil may begin shutting down its Beaumont, TX refinery today, a facility with a capacity of 362,000 bpd, due to rising waters. It also plans on shutting down a 240,000-bpd crude distillation unit. Motiva Enterprises will make a decision on Tuesday on whether or not to shut down its refinery in Port Arthur, TX, the nation’s largest oil refinery. The facility has a capacity of 603,000 bpd, but Reuters reportsthat high water and problems obtaining crude oil are affecting operations. At the time of this writing, no word has come from Motiva. The outages of these two refineries would seriously exacerbate the growing gasoline shortage.

Oil product cracks hit fresh 2-year highs as Harvey knocks out US refiners - Oil product crack spreads soared to fresh 2-year highs during Asian trade Wednesday, as Tropical Storm Harvey, now on its path into Louisiana, continued to cripple US refinery output and port infrastructure.  The NYMEX September RBOB crack spread against NYMEX October light sweet crude rose $2.50/b from Tuesday settle to $30.96/b as of 0457 GMT, having jumped by more than $8/b since the storm made landfall near Corpus Christi, Texas, on Friday night. The equivalent September NYMEX ULSD crack spread was up 97 cents/b at $24.48/b.This was the highest crack spread seen since July 2015 and May 2015 for NYMEX RBOB and ULSD respectively.The latest report from the US National Hurricane Centre showed southeastern Texas and southwestern Louisiana inundated with heavy rains as of 2200 CDT Tuesday (0300 GMT Wednesday).Estimates of US refining capacity that has been shut due to the storm have far outstripped the fall in crude oil production, prompting NYMEX RBOB and ULSD futures prices to surge even as upstream crude prices have fallen.Roughly 2.33 million b/d of Texas refining capacity remained shut, but the actual number is likely to be much higher, with a number of Texas refiners operating at reduced rates. Correspondingly, some crude production in the Eagle Ford Shale in Texas and the Gulf of Mexico were already returning by Tuesday. 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. Offshore in the Gulf of Mexico, 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 US Gulf output, down from 428,568 b/d Saturday.

European oil products spike on US storm Harvey -- European oil product prices continued to spike Wednesday, led by gasoline, as the supply implications of the impact of Tropical Storm Harvey on the US Gulf Coast's refining hubs reverberated through the region. With up to a fifth of total US refining capacity, or some 4 million b/d, still offline, markets are looking to Europe to provide clean product to markets the USGC normally supplies, such as Latin America, Brazil, Argentina and even the US West Coast. Shipping sources have already reported a flurry of trans-Atlantic fixtures and surging freight, with demand for gasoline shipments westwards the key driver. European gasoline prices have soared over two consecutive trading sessions on extra demand for cargoes required on the US Atlantic coast to substitute supply unable to leave the US Gulf Coast. The September Eurobob gasoline crack swap was assessed at $18.30/b Wednesday, up $2.80/b on the day, adding to the $1.35/b gained during the previous session, S&P Platts data showed. It was the highest level since August 13, 2015, when the crack swap was assessed at $18.85/b. Elsewhere in the paper market, the prompt strength caused the September/October Eurobob gasoline backwardation to widen to $57.75/mt, from $43.25/mt.  Additional demand for gasoline shipments west from Europe also was the key driver behind a spike in Medium Range tanker freight rates west of Suez. The UK Continent-US Atlantic coast route, basis 37,000 mt, was assessed at Worldscale 215 Wednesday, up w55 from Tuesday. The rapid change in rates was reflected in fixtures reported, with a number of tankers heard on subjects to go the US Atlantic coast at freight rates up to double those seen last week."The question really is now which ships will fail and which will be fixed, at the moment it is really all over the place," a broker said. "We've seen all kinds of numbers rumored to be on subjects, and it all really depends on how long those US refineries will be out."

Hurricane Harvey Is A Disaster For OPEC --  The skies are clearing over Houston, but the damage from the remaining elements of Hurricane Harvey has spread east to Port Arthur and Lake Charles along the Texas-Louisiana border. That has knocked more refineries offline, including the largest refinery in the United States.In the aftermath of the storm, the most serious threat to the energy industry is the extended outage of refineries and pipelines, according to Goldman Sachs. The problem actually looks worse than it did earlier this week as the deluge has shifted towards Port Arthur, another refining hub. Motiva, which runs the U.S.’ largest refinery in Port Arthur, began to completely shut down its 600,000 bpd facility on Wednesday.Goldman says the refinery shut downs, as of August 30, have spiked to 3.9 million barrels per day (mb/d), although upstream oil production outages have dropped below 1 mb/d. More ports are now closed – in addition to Corpus Christi and Houston, the ports of Lake Charles, Beaumont, and Port Arthur have shut down.These outages, the investment bank says, will mean that the “ongoing recovery in production will only be partial.” The refinery and pipeline closures are “leaving the oil market long 1.9 mb/d of crude vs. last Thursday, short 1.1 mb/d for gasoline and 0.8 mb/d for distillate.”  More worrying is that the recovery might not be quick. While most refineries had controlled shut downs, there are quite a few, especially in the Port Arthur region, that have been inundated with water, which means that the damage to them is still unknown. Based on the past major hurricanes of Rita and Katrina, Goldman speculates that about 10 percent of the 4 mb/d of refining capacity that has been disrupted will remain offline for several months. Other analysts agree that the damage could result in lengthier outages than many had hoped. “I'm actually quite concerned about Beaumont-Port Arthur because they just got a huge amount of rain in 24 hours, and we've already seen flooding within the refineries themselves, so we don't know exactly how bad it's going to be,” Andy Lipow, president of Lipow Oil Associates, told CNBC. “If it is bad, you're looking at six to eight weeks of outages over in Beaumont-Port Arthur.”

As oil prices weather storm, OPEC looks for long-term boost from Harvey (Reuters) - For veteran OPEC officials, Hurricane Harvey's impact on global oil markets is one of the strangest things they have seen. The storm has led to some of the biggest disruptions to U.S. energy infrastructure; yet it has failed to boost crude prices. In contrast with previous major hurricanes such as Katrina in 2005, Harvey has actually seen oil prices edge down as traders have focused more on the hit to demand from damaged U.S. refineries than the blow to supply from knocked-out production. That is deeply frustrating for OPEC countries currently restricting oil supplies in an attempt to push prices higher. "It seems no event will move the oil price up much," said one OPEC delegate, surprised by the lack of impact from Harvey. Another was also bemused after oil prices fell this week, defying too a steep drop in Libyan production due to unrest. "It is all really strange. The sentiment of the market has changed a lot in the last 10 years," he said. Whether the market continues to frustrate its would-be masters remains to be seen, however, with analysts divided whether demand from U.S. refineries will recover more quickly than U.S. production. In the past two years, OPEC has restrained production to prop up prices, because the pain of cheaper barrels was putting too much stress on most members' finances. The move has revived growth in the U.S. oil industry, with production and exports hitting new highs - until Harvey. Unlike hurricanes Katrina or Gustav, when strong winds mainly caused damage to oil production, Harvey has also severely disrupted the U.S. refining industry and products pipelines, causing a spike in products prices. Olivier Jacob from consultancy Petromatrix said U.S. gasoline prices were trading at levels normally equivalent to oil prices of around $84 per barrel, whereas Brent and WTI crude futures are actually at $51 and $46 per barrel respectively. "OPEC must be raging, they're not getting any of this (gain)," Jakob said. 

Selected Data Points From The Weekly Petroleum Report -- August 30, 2017 -- Some data points (and my comments) from the weekly petroleum report for the week ending August 25, 2017:

  • crude oil refinery inputs up slightly
  • refineries operating at 96.6% of their capacity
  • gasoline production increased; distillate fuel production decreased
  • US crude oil inventories decreased by 5.4 million bbls -- now at 457.8 million bbls; this is the middle of the average range for this time of year
  • total gasoline inventories unchanged; near the upper limit of the average range (which makes the spike in gasoline prices even before any effect from Hurricane Harvey highly suspect -- as usual)
  • motor gasoline supplied average 9.7 million bbls/day, up by 0.2% from the same period last year (will this be seen on the weekly graph, yet to be posted?)

WTI/RBOB Algos Undecided After Gasoline Build, Production Dip  RBOB gasoline is at a 25-month high (and WTI has a $45 handle) as all attention is focused on the duration and impact of the storm (i.e. how long refineries will be closed?). Inventory and Production data this week will be of limited help to traders as it occurred before Harvey struck but API confirmed the crude draw, gasoline build trend overnight, and DOE data shows the same pattern - crude draw, gasoline (and distillates) build and both WTI and RBOB dipped on the print.Before we get to the numbers, we note the following...“The next couple of weeks, I don’t know if you should try to read very much into it just because it’s subject to such impact because of Harvey,”Kyle Cooper, director of research with IAF Advisors, told Bloomberg.“It’s going to take a long time for the infrastructure to get back to order”  API:

  •   Crude -5.78mm (-1.75mm exp)
  • Cushing +582k (+200k exp)
  • Gasoline +476k (unch exp)
  • Distillates -486k

DOE:

  • Crude -5.39mm (-1.75mm exp)
  • Cushing +689k (+200k exp)
  • Gasoline +35k (unch exp)
  • Distillates +748k

The previous week's data calmed fears of gasoline builds, but API overnight showed a decent build (and at Cushing). DOE however shows this week with notable crude draw and product builds once again...

RBOB Gasoline Spikes To 25-Month Highs As Harvey Curbs Output --Front-month (Sept) RBOB Gasoline futures traded as high as $1.90 this morning - the highest since July 2015 - as more refiners (including America's largest) shutdown output due to Harvey's impact. As Bloomberg reports, America’s largest oil refinery is joining the spate of shut-downsin the face of Tropical Storm Harvey’s apocalyptic rains, potentially reducing U.S. fuel-making capacity to the lowest level since 2008. Motiva Enterprises LLC’s Port Arthur facility, the largest in the U.S., is shutting because of severe flooding issues, according to a person with knowledge of the plant’s operations who didn’t want to be identified because the information isn’t public. Motiva, owned by Saudi Arabia’s national oil company, said in a statement that the plant was operating at about 40 percent of its 605,000-barrel-a-day capacity.It joins more than a dozen other plants in Texas with combined capacity of more than 4 million barrels a day that have gone at least partially offline since Harvey approached the coast late last week. That amount of offline capacity could reduce U.S. fuel production to the lowest since Hurricane Ike shut several refineries after striking the Texas coast in 2008.

Oil factbox: USGC refinery outages, port closures continue to increase Aug 30 -  While some Texas refiners were beginning to restart operations Wednesday as Tropical Storm Harvey moved into Louisiana, others were bringing plants down, causing a further reduction in available refining capacity.Motiva, Total and Valero shut their Port Arthur, Texas plants, although Valero was preparing to restart its Corpus Christi and Three Rivers refineries and Marathon was restarting its Texas City plant.The Port Arthur outages bring the storm-related outages to 3.04 million b/d, or 16% of total US capacity. Assuming refiners cutting runs or in the process of returning are at 50% of capacity, the total downed capacity rises to 4 million b/d (22% 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. Weather conditions in Houston and offshore have improved after Tropical Storm Harvey shifted toward Louisiana. Houston-Galveston port officials hope to restart limited ship movements soon, the Greater Houston Port Bureau said Wednesday, although higher currents from rivers and bayous will make navigation a challenge for some vessels, even after port facilities reopen. Corpus Christ officials hope to reopen ports by September 4.

Harvey shuts down major fuel pipeline supplying East Coast - American energy supplies have suffered another blow from Harvey, the monster storm that's been battering the Gulf Coast. The Colonial Pipeline, which carries huge amounts of gasoline and other fuel between Houston and the East Coast, is shutting down after Harvey forced the closure of refineries and some of the pipeline's own facilities. The pipeline has two main lines that together transport more than 100 million gallons of gasoline, heating oil and aviation fuel as far as the New York harbor each day.  Its operator said the line that carries mainly diesel and aviation fuels will stop running Wednesday evening, and the line for gasoline, which is already operating at a reduced rate, will be suspended Thursday. Half of the 26 refineries that supply Colonial's 5,500 miles of pipeline are located between Houston and Lake Charles, Louisiana. "Once Colonial is able to ensure that its facilities are safe to operate and refiners in Lake Charles and points east have the ability to move product to Colonial, our system will resume operations," the operator said. Power outages during Hurricanes Katrina and Rita in 2005 forced the shutdown of parts of the Colonial Pipeline for several days. It also twice had to suspend services last year due to a leak and a fire.  In the massive underground interstate system that is the nation's pipeline network, the Colonial Pipeline is I-95.Earlier Wednesday, the largest oil refinery in the country started shutting down as Harvey, which has now weakened to become a tropical depression, caused more catastrophic flooding along the Gulf Coast. Thirteen oil refineries have been shut down or are in the process of closing, while several others are operating at reduced rates. Altogether, the disruption has knocked out about a fifth of the nation's refining capacity, according to S&P Global Platts.

Front-Month RBOB Tops $2 After Colonial Pipeline Shutdown -- Gasoline prices have exploded higher once again this morning - topping the Maginot Line of $2.00 for the first time since July 2015 - following reports that the main conduit for fuel from the Gulf to the East Coast has been shut due to Hurricane Harvey. Motor fuel prices climbed as much as 6.6 percent in New York, advancing for an eighth session, while crude oil was little changed. Harvey has shuttered about 23 percent of U.S. refining capacity, potentially cutting fuel-making ability to the lowest level since 2008 and depriving the Colonial Pipeline of supplies.Its operator was forced to shut the main diesel line late Wednesday and planned to halt its gasoline line Thursday, meaning motorists from Maine to Florida may soon see higher prices at the pump.Colonial, which is the biggest single fuel transporter in the US, shipping more than 2.5m barrels a day on its line - or roughly one in every eight barrels of fuel consumed in the country - said in a statement late on Wednesday that its line carrying diesel and jet fuel would shut on Wednesday evening, followed by its gasoline pipe on Thursday.    And that sent front-month RBOB above $2... Additionally, WTI prices are lower following news that the strategic petroleum reserve has authorized release of 500,000 barrels of crude to Phillips 66 Lake Charles refinery...

WTI/RBOB Tumble As Valero Says Refinery Startup Underway - RBOB is tumbling near $1.60 handle after headlines reported Valero saying that startup is underway at its Three Rivers refinery and its Corpus Christi refinery, both in Texas, according to a statement from co. spokeswoman Lillian Riojas.  Bloomberg reports that the company is working to ensure availability of critical transportation and logistics infrastructure to resume all operations. Houston and Texas City, Texas, facilities continue to operate. Port Arthur, Texas, refinery shut because of flooding and potential power supply interruption.Additionally, Plains resumed service on its Cactus crude pipeline after shutting it down Friday in preparation for Harvey, according to person familiar with matter.And,  Buckeye expects to restore its 50k b/d condensate splitter to normal operations to at Corpus Christi, Texas, later Wednesday. But it appears the machines took comfort in the headline...sending RBOB to the lows of the day...

Gas factbox: Production rises, demand remains down - Harvey isn't finished ravaging the US Gulf Coast Wednesday as the tropical storm enters Louisiana after dumping historic amounts of rain on the coastal region of Texas and delivering a 1,000-year flood to the nation's energy capital, Houston. At 10:00 am CDT Wednesday, the center of Tropical Storm Harvey was moving farther inland over southwestern Louisiana, according to the National Weather Service. "Harvey is moving toward the north-northeast near 8 mph (13 km/h) and this general motion is expected to continue through Thursday," the weather service said, adding "a turn toward the northeast is expected Thursday night and Friday." The forecast calls for Harvey to move through southwestern and central Louisiana Wednesday, then pass through northeastern Louisiana and northwestern Mississippi Thursday and Thursday night. Harvey had sustained winds near 45 mph Wednesday morning; weakening is expected over the next 48 hours. Offshore Gulf natural gas production was on the upswing Wednesday, rising to 2.7 Bcf/d from 2.6 Bcf/d Tuesday and a low of 2.4 Bcf/d Saturday. Offshore Gulf production remains down about 0.8 Bcf/d from the month-to-date average prior to the storm. Total US production is back up to 72.4 Bcf/d from a low of 71.95 Bcf/d Saturday, but remains about 0.6 Bcf/d below the month-to-date average prior to the storm, with most of that decline in the Southeast offshore portion of the Gulf.

Gas prices keep climbing as Harvey shutters oil refineries -- Tropical Storm Harvey is sending pump prices higher for motorists and causing temporary shifts in the flow of oil and gasoline around the world after taking down a huge chunk of U.S. refining capacity.  Retail gas prices in the U.S. climbed 2 cents a gallon on Wednesday and have rise 7 cents in the past week, to a national average price of $2.42 per gallon, according to Gasbuddy.  "In terms of product price increases, it might get worse before it gets better," said Rob Smith, an energy analyst with IHS Markit. It will be days or even weeks before the energy sector in the southeast Texas Gulf Coast is back to normal operations. The region accounts for about 3 percent of the U.S. economy and is a crucial export market for oil and chemicals.  Wednesday brought news that the nation's biggest refinery, in Port Arthur, Texas, had begun a complete shutdown, the latest domino to fall among Gulf Coast refineries. The facility lies along the border with Louisiana, a hub for refineries that collectively account for more than 12 percent of the nation's refining capacity, according to IHS Markit. More than one-fifth of U.S. refining capacity has been shuttered since Harvey made landfall on August 25, according to S&P Global Platts.Mathew Peterson, chief wealth strategist for LPL Financial, noted that refiners' inability to produce and distribute gas is weighing on supplies, driving up prices at the pump. It could take two weeks or longer before big refineries in the Houston area can recover from a record-setting deluge and resume normal operations. That assumes they didn't suffer serious damage, which is still unknown. "Only when the water is gone will refineries be able to estimate how much damage they have -- presently, it's very difficult,"

US Releases 500,000 Barrels Of Oil From Strategic Reserve As Largest US Refinery May Be Shut For 2 Weeks --The U.S. Energy Department announced on Thursday that it would release 500,000 barrels of crude oil from the US Strategic Petroleum Reserve as a result of the disruption to the US petroleum industry following Hurricane Harvey amid fears of a surge in motor fuel prices, which have been compounded by the previously reported shuttering of the Colonial pipeline. According to the DOE statement, the oil will be delivered to the Phillips 66 refinery in Lake Charles, Louisiana, a plant which has not been affected by the storm.According to Reuters, the release - the first emergency release from the reserve since 2012 - will include 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil. It was an exchange agreement, meaning the government will loan crude to Phillips 66, which is required to replace the reserve’s oil at a later date.The Energy Department “will continue to provide assistance as deemed necessary, and will continue to review incoming requests for SPR crude oil,” spokeswoman Jess Szymanski said. The reserve, a legacy from the 1970s Arab oil embargo which caused panic over fuel supply, currently contains 679 million barrels of oil. It is a small release of crude for a country that uses nearly 20 million barrels of petroleum daily.Furthermore, it is unclear what if any benefit the SPR release will do to surging gasoline prices, as the bottleneck is not oil supply but rather refining capacity: as of this moment roughly 20% of US refining is offline as a result of Harvey. As we reported this morning, gasoline prices surged in morning trade after the Colonial Pipeline which operates the biggest U.S. fuel transport system, said it would shut its main lines to the Northeast amid outages at pumping points and lack of supply from refiners.  Separately, and confirming that the gasoline price spike may last longer than initially expected, moments ago Reuters reported that Motiva Enterprises' Port Arthur, Texas refinery, the largest in the US, may be shut as long as two weeks for assessment of the plant and repair of any damage, sources familiar with plant operations said on Thursday. The 603,000 barrel per day (bpd) Port Arthur Refinery was shut on Wednesday due to flooding from Tropical Storm Harvey.

U.S. taps 1M barrels of oil from emergency stockpile to ease gas price -- The Energy Department is cracking open the nation's emergency stockpile of oil reserves for the first time in five years to help ease the impact of Hurricane Harvey on gasoline prices.Energy Secretary Rick Perry on Thursday ordered the release of 1 million barrels of oil from the Strategic Petroleum Reserve, a massive government underground storage system designed to provide an emergency backup in event of oil supply distruptions.The move comes amid rising gas prices following the temporary closure or planned shut downs at 16 refineries along the Texas Gulf Coast that have been overwhelmed by flood waters. About 25% of the nation's refining capacity is offline indefinitely due to the monster storm and flooding, according to Energy Department. For some refineries that remain open, obtaining oil to make gasoline is an issue. Closure of ports in Houston and Corpus Christi, reduced capacity of the critical Colonial Pipeline and the inaccessibility of certain roads has undermined access to oil. Thursday's ordered release will allow the Energy Department to deliver the crude oil to a Phillips 66 refinery. The national average of gas could peak at 25 cents higher than before Harvey, Oil Price Information Service analyst Tom Kloza said. Nationally, prices averaged $2.45 a gallon on Thursday, up 10 cents from a week ago and hitting a high for the year, according to AAA.

Panic Buying Has Begun In North Texas -- August 31, 2017 Starting last night, here in north Texas folks have been advised to keep their gasoline tanks full due to the impending shortage of gasoline in Texas, extending from the southeast coast up to Dallas-Ft Worth.   This morning the message is being heard. Long lines are already forming at our neighborhood gasoline stations. If everyone fills their tank today and in tomorrow, I would assume many gas stations will run out of gasoline by mid-weekend, but at least all those folks that aren't traveling over the weekend will have a tank full of gasoline (or more, if they own multiple cars) sitting in their driveways.  President Trump has already responded to Senator Markey's request and has released 500,000 bbls of crude oil from the SPR. That allotment will go to the Lake Charles Phillips 66 refinery. Some data points about that refinery:

  • crude oil capacity: 250,000 bbls (so they will receive a two-day supply)
  • total capacity: 285,000 bbls (I assume total capacity includes non-crude oil hydrocarbon products such as NGLs)
  • gasoline production: 90,000 bbls/day (almost exactly 1% of US total daily demand)

Sep NYMEX RBOB futures jump 6% as Harvey knocks out Port Arthur refiners -- September NYMEX RBOB futures soared by more than 6% in Asian morning trade Thursday, as Harvey, which was downgraded to a tropical depression, still continued to impact US Gulf Coast refinery output.While some Texas refiners were beginning to restart operations Wednesday as Harvey moved into Louisiana, others were bringing plants down, causing a further reduction in available refining capacity.Motiva, Total and Valero shut their Port Arthur, Texas plants, although Valero was preparing to restart its Corpus Christi and Three Rivers refineries and Marathon was restarting its Texas City plant.At 11:50 am Singapore time (0350 GMT), NYMEX September RBOB was up 11.54 cents (6.12%) from Wednesday's settle at $2.0001/gal, while NYMEX September ULSD was up 1.17 cents (0.7%) to $1.6855/gal.The front-month NYMEX RBOB contract was now at highs not seen since July 2015, having climbed for the last seven sessions even as upstream crude prices have tanked. The latest report from the US National Hurricane Center said Eastern Texas and Western Louisiana remained paralyzed by flooding rains as of 2200 CDT Wednesday, as Harvey began to make its way across statelines. The Port Arthur shutdowns bring the storm-related outages to 3.20 million b/d, or 17.3% of total US capacity. Assuming refiners cutting runs or in the process of returning are at 50% of capacity, the total downed capacity rises to 4.08 million b/d (22% of the US total).

U.S. oil prices set for worst month in over a year as floods hit demand (Reuters) - U.S. crude oil prices are on track to post the steepest monthly losses in more than a year on Thursday as concerns spread over falling demand in the world's top oil-consuming country after storm Harvey knocked out almost a quarter of its refineries. But prices rallied in the oil products markets, with U.S. gasoline futures hitting a two-year high above $2 a gallon, buoyed by fears of a fuel shortage just days ahead of the Labor Day weekend that typically sees a surge in driving.  Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralysed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates. Traders from Europe to Asia were scrambling to fix fuel cargoes to the United States.  Goldman Sachs said it could take several months to restore all production. "While no two natural disasters are similar, the precedent of Rita-Katrina would suggest that 10 percent of the ... currently offline capacity could remain unavailable for several months," the investment bank said.  For an interactive graphic on Harvey's energy impact click tmsnrt.rs/2xzsKWzCrude markets remained weak after sharp losses in the previous session. The closure of so many U.S. refineries has resulted in a slump in demand for the most important feedstock for the petroleum industry. U.S. West Texas Intermediate (WTI) crude futures CLc1 were set to close the month down 8 percent, their steepest monthly loss since July 2016. They traded at $46.12 a barrel at 0849 GMT, up 16 cents on the day, after falling more than 1 percent on Wednesday. International benchmark Brent crude LCOc1 was at $50.86, unchanged from the previous day, when the contract fell more than 2 percent.  "The temporary closure of refineries is a major dent to United States crude demand and is weighing on both Brent and WTI prices," BMI Research said.

Natural Gas Factbox: Full market recovery seen weeks away -- US Gulf of Mexico offshore natural gas output rebounded Thursday, while exports to Mexico struggled to return to normal and some midstream operators continued to report disruptions almost a week after Harvey struck Houston, according to a Thursday afternoon report by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets. Domestic gas demand recovered slightly, but remained down about 2.5 Bcf/d from the month-to-date average prior to the storm and is still down 4.1 Bcf/d from August 2016 levels. Analysts expect it to take weeks for the market to fully recover, after the storm dumped upwards of 50 inches of rain on Houston over the past week. Meanwhile, Hurricane Irma is taking shape northeast of Venezuela, according to the US National Weather Service. * Offshore Gulf natural gas production remained on the upswing, rising to 3 Bcf/d from 2.7 Bcf/d Wednesday and a low of 2.4 Bcf/d on Saturday, according to Platts Analytics' data. Offshore Gulf production remains down about 0.4 Bcf/d from the month-to-date average prior to Harvey. Total US production is back up to 73 Bcf/d from the low of 71.95 Bcf/d on Saturday, and remains only slightly (34 MMcf/d) below from the month-to-date average prior to the storm. * US natural gas exports to Mexico remain down about 1 Bcf/d (22%) from the month-to-date average prior to the storm. Exports on Thursday averaged 3.4 Bcf/d compared to a month-to-date average of 4.3 Bcf/d and a maximum of 4.5 Bcf/d on August 2, according to Platts Analytics' data. Exports to Mexico hit a summer low of 2.9 Bcf/d on Saturday when Harvey disrupted supply availability and pipeline transportation in South Texas. * US gas demand recovered slightly, but remained down about 2.5 Bcf/d from the month-to-date average prior to the storm and is still down 4.1 Bcf/d from August 2016 levels. Gas demand from power generation is down about 3.3 Bcf/d from the month-to-date average prior to the storm to about 31.1 Bcf/d, compared to 31 Bcf/d on Wednesday and 27.9 Bcf/d on Saturday. * Power burn in Texas, however, remains very weak and is down 2.1 Bcf/d (37%) from the month-to-date average prior to Harvey.

Oil rises, gasoline jumps 10 percent as U.S. refineries reel (Reuters) - Gasoline futures surged 10 percent on Thursday as almost a quarter of U.S. refining capacity remained offline and traders scrambled to reroute millions of barrels of fuel, while oil prices rose nearly 3 percent. U.S. gasoline futures RBc1 have rallied roughly 26 percent from the previous week to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the Labor Day weekend that typically brings a surge in driving. Gasoline was up 21.03 cents, or 11.2 percent, at $2.0950 at 1:53 p.m. (1753 GMT). Hurricane Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralysed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates. The shutdowns led the U.S. government to tap its strategic oil reserves for the first time in five years on Thursday, releasing 500,000 barrels of crude to a working refinery in Louisiana. Traders were also scrambling to redirect fuel to the United States. U.S. West Texas Intermediate (WTI) crude futures CLc1 recovered some early-week losses, trading $1.24 per barrel higher at $47.20 per barrel at 1309 EDT (1709 GMT). It was still on track to close the month down just under 6 percent, the steepest monthly loss since March.

Looming Gas Shortage: “Imports Can’t Make Up For This” - The East Coast will start feeling the effects of Hurricane Harvey as the gasoline supplied from the Gulf Coast starts to dry up. One of the most important pipelines that ships refined products to the Eastern Seaboard shut down on Thursday, which means that the U.S. Southeast, Mid-Atlantic, and Northeast could see supply disruptions and price increases. The Colonial Pipeline carries gasoline, diesel and jet fuel from several refineries in Houston, Port Arthur and Lake Charles, along the Texas and Louisiana Coast, up through the U.S. Southeast to Washington DC, Baltimore, and New Jersey. The pipeline had been operational through the worst of the Hurricane, easing fears about supply disruptions. But the outages at the nation’s top refineries along the Gulf Coast have forced the Colonial Pipeline company to announce on Wednesday that it was shutting down Line 2, which carries diesel and jet fuel due to “supply constraints.” And on Thursday, the company shuttered Line 1, the pipeline that carries gasoline. The pipeline company said that operations would only resume when it can “ensure that its facilities are safe to operate and refiners in Lake Charles and points east have the ability to move product to Colonial.” It is hard to overstate the critical role that the Colonial Pipeline plays. It carries 2.5 million barrels of refined products per day, or as the FT notes, “roughly one in every eight barrels of fuel consumed in the country.” More importantly, it is one of the only suppliers for major cities on the eastern seaboard, including New York, Washington DC and Atlanta. “With no refineries between the Gulf coast and Pennsylvania, the south-east is largely dependent on pipelines from the Gulf coast for their fuel, with Colonial being the largest,” “With Colonial shut and a quarter of Gulf coast refining capacity out, the south-east will need to get fuel from storage, other forms of transport from the Gulf like trucks and ships, and imports. Consumers will see the impacts of these disruptions and higher cost alternatives in higher prices paid at the pump.” It is unclear when the refineries will be able to come back online, but there are some signs of recovery.  . According to IHS Markit, Corpus Christi is “faring the best” among the cities on the Texas coast that were badly hit, with its four major refineries set to resume operations this week. But that does little for the Colonial Pipeline, which depends on refineries further up the coast along the Texas-Louisiana border, an area that was dealing with catastrophic flooding mid-week.

OilPrice Intelligence Report: Fears Of A Gasoline Shortage Rise: Hurricane Harvey is still far and away the major story of the week in the energy world, with an huge number of refineries still offline. Oil prices continue to sag, while gasoline prices soared this week. Refinery outages persist. Some refineries in the Corpus Christi region are coming back online, but the larger ones in Houston and Port Arthur/Lake Charles are mostly offline. The Motiva facility in Port Arthur, the largest in the country, is still offline and could remain out of commission for two weeks, according to the latest reports. As of Friday, an estimated 3 mb/d of refining capacity is still offline, a slight improvement from earlier this week. Colonial Pipeline outage interrupts gasoline flows to east coast. The Colonial Pipeline carries more than 2 million barrels per day of refined products – diesel, jet fuel and gasoline – from Texas and Louisiana up through much of the U.S. Southeast and Mid-Atlantic. The pipeline was forced to shut down because of problems sourcing enough product. The outage has led to a spike in gasoline futures, pushing them up to their highest level in years. "Typical Colonial Pipeline volumes are equivalent to Europe's gasoline exports, so these volumes will be difficult to replace and will require supplies from distant regions if the outage is prolonged," Wood Mackenzie analyst Alan Gelder said in a note. As of now, the pipeline is slated to come back online in a few days as refineries along the Gulf Coast trickle back online. But it will likely operate at reduced rates through next week at least. "The major refined product pipelines out of Houston are mostly shut because there is no gasoline and diesel to pump," said Andy Lipow, of Lipow Oil Associates. . TransCanada announced the closure of the southern leg of its 600,000 bpd Keystone pipeline that runs from Cushing to refineries along the Texas Coast. The disruption could lead to a sharp increase in inventories at the Cushing storage facility. Discounts are deepening for Permian crude relative to WTI. 

Oil Factbox: Gasoline prices soar on Harvey-related outages -- US gasoline prices continued to rise Thursday as downed refineries tightened supplies in the US Gulf Coast and the Atlantic Coast. NYMEX September RBOB settled at $2.1399/gal Thursday, up 25.52 cents/gal, and up more than 50 cents from August 22, before Texas coastal refineries began shutting down ahead of Harvey. Physical New York prices were higher as well. New York barge delivery RBOB was assessed by S&P Global Platts at a 44-cent/gal premium to the October RBOB contract, compared with a 30-cent/gal premium Wednesday. Colonial Pipeline, which is able to ship 1.37 million b/d of gasoline o//n its Line 1 from Houston to Linden, New Jersey, said deliveries will be "intermittent and dependent on refinery supply." Roughly 3.04 million b/d of refining capacity remains down in Texas, or 16% of US capacity. Assuming refiners cutting runs or in the process of returning are at 50% of capacity, the total downed capacity rises to 4 million b/d, which is 22% of the US total. Motiva is preparing to start up its 603,000 b/d Port Arthur, Texas, refinery -- the nation's largest -- once flooding from Harvey subsides, but was unable to provide a firm timeline for when that would be. With so much Texas refinery capacity offline, it is important to keep Louisiana refiners running to feed local demand and the Colonial Pipeline. The US Strategic Petroleum Reserve will release a total 1 million barrels of crude to Phillips 66 for its Lake Charles, Louisiana, refinery. The plant is running normally, and likely sought an SPR release to help bolster crude supplies constrained by weather-related port closures. * Jet fuel differentials in the Gulf and Atlantic coasts spiked Thursday as supply problems continued to plague markets, reaching levels not seen since Hurricane Ike ravaged the Gulf Coast in September 2008.  

Harvey Hangover Hits Pump Prices, Jet Fuel Premium Highest Since 2008 -  "It's only just beginning," warned one seasoned veteran energy trader as the hangover from Hurricane Harvey flows downstream to retail gas prices and jet fuel premiums. As Bloomberg notes, Harvey impact currently includes:

  • Colonial says it’ll commingle Rbob and conventional gasoline
  • Explorer Pipeline planning to start lines Saturday, Sunday
  • Logjam grows to 29 oil tankers as 11 ports remain closed
  • Total Port Arthur is said facing extended shutdown on power loss
  • Texas storm bucks N.Y. traders with wild gasoline expiry swings
  • NHC issues final advisory on Harvey; losing tropical character

Which has left retail gas prices at the pump are now at their highest in 2 years...  And judging by their usual lagged response to RBOB, are set to go dramaticaly higher in the next few weeks... And while inventories are high, deliveries are slow and fears of shortages have created lines at many Texas gas stations...  "This is going to be a substantial ouch for consumers," said Tom Kloza, global head of energy analysis for Oil Price Information Service. "Satan could not have drawn up a more horrible geographic scenario for knocking out Texas refining." But it is Jet Fuel premiums that are even more worrisome...New York jet fuel’s premium to Nymex futures rises 20.5c to 36c/gal., widest since 2008, data compiled by Bloomberg show.

US rig count increases by 3 this week to 943 — The number of rigs exploring for oil and natural gas in the U.S. increased by three this week to 943.  A year ago, just 497 rigs were active. Houston oilfield services company Baker Hughes said Friday that 759 rigs sought oil and 183 explored for natural gas this week. One was listed as miscellaneous. Among major oil- and gas-producing states, New Mexico added three rigs. Alaska gained two and Pennsylvania one. Texas and Wyoming each lost a rig. Arkansas, California, Colorado, Louisiana, North Dakota, Ohio, Oklahoma, Utah and West Virginia were all unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May of 2016 at 404.

Baker Hughes: US rig count gains 3 units to 943 - The overall US rig count has made a slight gain this week, marking the end of four straight weeks of declines. Baker Hughes’ calculation of active US rigs jumped 3 units during the week ended Sept. 1 to 943.  Rigs drilling for oil were unchanged at 759 rigs compared with last week, while those rigs targeting natural gas gained 3 units to 183 rigs. Rigs unclassified were unchanged again this week at 1 unit.The US rig count is up 446 rigs from last year’s count of 497, with oil rigs up 352, gas rigs up 95, and unclassified rigs down 1 to no rigs drilling.The US offshore rig count decreased 1 rig from last week to 16. This count is up 6 year-over-year. On land, meanwhile, the count jumped up 3 units to 923 units this week.Among the major oil and gas-producing states, New Mexico gained 3 rigs this week to 65. Alaska gained 2 units to 6 rigs drilling. And Pennsylvania gained 1 rig to reach 32 units. Nine states were unchanged this week: Oklahoma, 130; Louisiana, 66; North Dakota, 52; Colorado, 37; Ohio, 29; California, 16; West Virginia, 14; Utah, 8; and Arkansas, 1. Two states—Texas and Wyoming—were down 1 rig each this week to respective counts of 455 and 25. In Canada, the overall rig count fell 16 units this week to reach 201. Rigs drilling for oil fell 13 units to 102 and those targeting gas fell 3 units to 99. The total count is up 64 units from this time a year ago when 137 rigs were working.

U.S. Oil Rig Count Flat Despite Hurricane Harvey -- The number of active oil and gas rigs in the United States rose this week by 3 rigs, largely dispelling earlier analyst notions that Hurricane Harvey would delay as much as 10 percent of upcoming fracking work, and suspend roughly half the rigs in Eagle Ford. The total oil and gas rig count in the United States, post Harvey, now stands at 943 rigs, up 446 rigs from the year prior, with the number of oil rigs in the United States flat this week and the number of gas rigs increasing by 3. Oil rigs in the United States now number 759—352 rigs above this time last year. While some were expecting a boost in oil prices due to an expectation that there would be a Harvey-related drop in the number of active US rigs, refinery shutdowns in the US—which had climbed to about a third of total crude oil refining in the United States and include the first and second largest refineries in the US—severely diminished the demand for crude oil as refineries have no need for the crude while in shutdown mode. While some refineries have since restarted production, 16 percent of total US refinery capacity—or 3.04 million barrels per day—remains offline in Texas. In 2005, it took refineries between one and two months to resume normal operations in the wake of Katrina. Prices continued to fall on Friday—and were off 6 percent on the month as a whole—despite decreased exports from OPEC for the month of August. At 12:15pm EDT Friday, WTI was trading down 0.42 percent at US$47.03, with Brent trading down 0.40 percent at US$52.65. Related: Failed Oil Price Recovery Slams Energy StocksIn line with a small rise in the number of oil rigs, US crude oil production continues to increase, with average production averaging 9.530 million barrels per day for the week ending August 25, up just slightly from 9.528 million bpd the week prior. While Hurricane Harvey, which was downgraded to a tropical storm before its conclusion, is safely in the oil industry’s review mirror, Hurricane Irma—upgraded Thursday to a Category 3 and expected to strengthen in the coming days—is currently headed for the Caribbean and has the potential to deal yet another blow to the US as early as late next week. At 6 minutes after the hour, WTI was trading at $47.04 with Brent crude trading at $52.49.

Shia Insurrection in Saudi Arabia; The Battle for Awamiya -- Since May, 2017 an ongoing insurgency has been raging in the Shia heartland town of Awamiya in eastern Saudi Arabia and it’s only thanks to the BBC being allowed to enter the area and film the destruction that the world can see how the House of Saud’s war against the Shia population of Yemen has now expanded to include the Shia population of eastern Saudi Arabia.The BBC World report shown on Wednesday, August 16, seemed to have come from Syria, with al-Zara, the ancient Shia capital of the Persian province of Bahrain and the rest of the town of Awamiya showing a level of devastation resembling that in Syria or to the Kurdish cities destroyed recently by Erdogan Ottoman’s Janissarris.Block by block destruction of the Old City with no visible signs of the Shia people who once lived here for millenia with almost 500 buildings destroyed and over 20,000 driven from their homes by Saudi airstrikes, artillery and mortar fire.The BBC crew was only allowed there in armored vehicles, filming through bullet proof windows while traveling as a part of an armored convoy. The one time they were allowed to stop and step outside the battlewagons they were riding, firing could by heard and they were quickly ordered to return to their vehicles so they could escape.This short view of an almost unknown urban war in the midst of the Saudi oilfields, with 2 million barrels a day being pumped via Awamiya alone (20% of total Saudi exports) with the House of Saud, after Russia, being the 2nd largest oil producer worldwide, should be sending shivers down the spines of those occupying the seats of power both east and west. How long the Shia rebellion in eastern Saudi Arabia, home to almost all Saudi oil reserves, will be able to maintain an armed resistance to the Saudi military assault is the 10 million barrel a day question.

Saudi-led coalition admits killing 14 civilians in 'mistake' airstrike as pictures emerge of young victims: The Saudi-led Arab military coalition on Saturday admitted responsibility for an air strike the previous day in the Yemeni capital that killed 14 civilians, describing it as a "technical mistake". The attack was the latest in a wave of deadly raids on residential areas of Yemen blamed on the coalition, drawing strong international condemnation. The coalition, in a statement carried by the official Saudi Press Agency, said a review of the strike investigators had found "that a technical mistake was behind the accident". Witnesses and medics in Sanaa said several children were among 14 people killed in Friday's air strike that toppled residential blocks in Sanaa. On Saturday, Coalition spokesman Colonel Turki al-Malki said that the coalition "regrets the collateral damage caused by this involuntary accident and offers its condolences to the families and relatives of the victims". Friday's raid targeted Faj Attan, a residential neighbourhood in the south of the capital that has been controlled since 2014 by Huthi rebels. The coalition on Saturday accused the rebels of "setting up a command and communications centre in the middle of this residential area to use civilians as human shields". The International Committee of the Red Cross on Friday condemned the raid as "outrageous". Rights group Amnesty International's Middle East research director, Lynn Maalouf, said the coalition "rained down bombs on civilians while they slept". 

The Photos the U.S. and Saudi Arabia Don’t Want You to See - NYT - Let’s be blunt: With U.S. and U.K. complicity, the Saudi government is committing war crimes in Yemen. “The country is on the brink of famine, with over 60 percent of the population not knowing where their next meal will come from,” the leaders of the U.N. World Food Program, Unicef and the World Health Organization said in an unusual joint statement.  Yemen, always an impoverished country, has been upended for two years by fighting between the Saudi-backed military coalition and Houthi rebels and their allies (with limited support from Iran). The Saudis regularly bomb civilians and, worse, they have closed the airspace and imposed a blockade to starve the rebel-held areas into submission. That means that ordinary Yemenis, including children, die in bombings or starve.  This is Buthaina, a girl believed to be 4 or 5 who was the only survivor in her family of a bombing last week by the Saudi coalition that killed 14 people. Human Rights Watch has repeatedly concluded that many Saudi airstrikes were probable war crimes and that the U.S. shares responsibility because it provides the Saudis with air-to-air refueling and intelligence used for airstrikes, as well as with much of the weaponry. Yet victims like Buthaina aren’t on our television screens and rarely make the news pages, in part because Saudi Arabia is successfully blocking foreign journalists from the rebel-held areas. I know, because I’ve been trying for almost a year to get there and thought I had arranged a visit for this week — and then Saudi Arabia shut me down. With commercial flights banned, the way into rebel areas is on charter flights arranged by the United Nations and aid groups. But Saudi military jets control this airspace and ban any flight if there’s a journalist onboard. I don’t think the Saudis would actually shoot down a plane just because I was on it, but the U.N. isn’t taking chances.  This is maddening: Saudi Arabia successfully blackmails the United Nations to bar journalists so as to prevent coverage of Saudi atrocities.

US Coalition Attacks ISIS Convoy, Accuses Syria And Russia Of "Terror Transfer" -- In a surprise move that few analysts expected, the US led anti-ISIS coalition operating in Iraq and Syria has bombed parts of the ISIS convoy previously given safe passage out of Lebanon as part of a controversial deal brokered early this week with the Lebanese Army and its allies. Coalition spokesman Col. Ryan Dillan had previously warned that, “We will take action where necessary; those would be absolutely lucrative targets.” And it now appears the US coalition followed through by attacking the vehicles as they traveled across Syria to the Islamic State stronghold of Deir Ezzor. The initial warning was issued in reaction to the controversial deal that followed ISIS' defeat in northeast Lebanon. Since July the Lebanese Army, Hezbollah, and the Syrian Army have attempted to root out ISIS from positions in the western Qalamun area of Syria and the Jurud Arsal border region of Lebanon. The fierce campaign has had some degree of assistance from US special forces, acting in an advisory capacity for Lebanon's military. The territory was fully liberated Monday (August 28), but only after Lebanon struck a deal with the about 300 remaining ISIS fighters and their families which would allow them to lay down their weapons and exit through Syria in a convoy of buses (though reportedly allowed to carry light weapons such as rifles). Though ISIS was clearly defeated, the deal allowed for the turnover of the bodies of 9 deceased Lebanese soldiers previously kidnapped in 2014.

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