Heavy rains from Tropical Storm Harvey continue to exacerbate the flooding along the southeastern Texas coastline with its sights on southwestern Louisiana. According to the National Weather Service, rain southeast of Houston has exceeded 49.32 inches as of 10 am EST, breaking a previous tropical cyclone record set in 1978. Just as copious amounts of rain are falling in a short period of time in the Gulf Coast, headlines pertaining to refinery closures and or production cuts are being blasted across news wires at a rate only seen during devastating events such as this. Below is an updated U.S. Gulf Coast energy infrastructure table as of 11:45 am EST:
At least 2.9 million bpd of refining capacity is offline. That equates to more than 15% of total U.S. capacity. As mentioned in yesterday’s blog, Motiva Enterprises Port Arthur, Texas refinery would either continue the march upward in gas prices or give the refined products market a much deserved breather. Motiva has cut production due to flooding, but still has not decided whether to shut down the refinery completely. Also keeping RBOB and Heating Oil prices firm this morning is the 10” refined products Explorer Pipeline being down between Houston/Arlington. As of 11:45 am EST, RBOB for September delivery is up $0.0406 at $1.7529, September Heating Oil is up $0.0124 at $1.6467, and continuing the lack of demand theme, WTI for October delivery is down $0.71 at $45.86. Texas light sweet crude is down over 6% in three trading days since Thursday’s high of $48.43. With major exponential moving averages containing any upside strength in the crude around the $47.45 - $48.11 levels, the next major downside support is the 12 month channel-bottom of $42.84.
With all the uncertainty and potential major refinery shutdowns, a $3 move to the downside in crude does seem attainable in the near future. However, other bullish headlines such as: “Rebels attack oil pipeline in Columbia”, “Oilfields in Libya shut by pipeline blockade”, and “Saudi Arabia and Russia said to be pushing for a three-month extension to oil cut deal”, may not drag crude oil prices to the lower $40’s just yet. In the meantime, we await APIs this evening and DOEs tomorrow for an indication on pre-storm fundamentals. Our thoughts continue to be with coastal Texans and Houstonians. As for Louisianans, prepare for the worst and hope for the best.