Harvey has been downgraded to a Tropical Depression heading towards the heartland and the northeast, but the wake of destruction it has left behind on the Gulf Coast is one for the history books. With catastrophic flooding, lost lives, and an impact on the energy industry worldwide that hasn’t been seen in decades, this 1 in a 1000 year storm’s damages/losses, according to the governor of Texas, could top Katrina’s. Refinery closures extending eastward, a chemical plant exploding, gas shortages, and surging prices will spread the economic fallout. As the week has been playing out, we have been providing updates on the U.S. Energy Gulf Coast infrastructure shutdowns and production cuts, and the most bullish of scenarios has developed. Motiva’s Port Arthur 603,000 barrel per day refinery is shut due to flooding with no timeline for restart at this time and Colonial Pipeline, the main diesel, gasoline, and jet fuel pipeline that connects the refineries of the Gulf Coast to the populous East Coast with 3 million barrels of fuel every day, is shut because of outages at its supply points and a lack of supply from refineries. As these stars align, as of 1pm EST, the expiring front month RBOB for September delivery is up $0.2163 at $2.1010. Up almost 12% in one trading day. RBOB for October delivery is up $0.1192 at $1.7567.
Ultra-Low Sulfur Diesel for October delivery is up $0.0784 at $1.7338, and WTI is clawing back some of its losses up $1.25 at $47.21. With U.S. Department of Energy releasing 500,000 barrels of petroleum reserves and the potential for Colonial pipeline to come back on-line on Sunday evening, and whispers of Motiva’s Port Arthur refinery trying to restart in 2 weeks or less, all we can do now is cross our fingers and wait to see how this historic event plays out for months to come. Our thoughts continue to be with all of those that have been affected by this historic Hurricane Harvey.