Oil prices rose and gasoline futures jumped above $2 a gallon on Thursday, as flooding due to now-Tropical Depression Harvey continued to wreck havoc on refineries along the Gulf Coast.
Gasoline for September delivery
which expires at the Thursday’s settlement, was up 20.5 cents, or 11%, at $2.09 a gallon. Front-month futures contracts for the fuel haven’t settled over $2 since July 2015, according to FactSet data.
The October contract
which is already the most-active contract, will become the front-month contract at the day’s settlement. It was up 6.4 cents, or 3.9%, at $1.701 a gallon.
September heating oil
which also expires at the settlement, rose 7.3 cents, or 4.4%, to $1.711 a gallon.
Meanwhile, West Texas Intermediate crude oil for October
rose $1.18, or 2.6%, to $47.13 a barrel on the New York Mercantile Exchange, rebounding after a three-session streak of losses. Brent for the same month
added 90 cents, or 1.8%, to $51.76 on ICE Futures Europe.
The sharp jump for gasoline comes after a week when the devastating weather system Harvey doused Texas and Louisiana with unprecedented amounts of rain, causing flooding and taking several refineries offline.
“Taking into account reduced runs at a number of Texas and Louisiana refineries, S&P Global Platts estimates 4.1 million [barrels a day] of refinery capacity remains offline as of Wednesday night, nearly half of the U.S. Gulf Coast’s capacity and 22% of U.S. refining capacity,” Nicole Leonard, senior project consultant at S&P Global Platts Consulting, said late Wednesday.
“On the supply side, operations appear to be resuming, though refinery demand in the region may limit the pace of activities in the Eagle Ford, Permian, and other plays where pipeline and processing infrastructure are also impacted by the storm,” she said.
Overall, a ‘return to normal’ continues to remain precarious, impacting prices at the pump in the Gulf, the Midwest, and the Northeast, with estimates ranging up to a month before prices at the pump return to normal autumn levels,” said Leonard.
Front-month gasoline futures have soared 13% week to date, and they are on track for a roughly 12% jump in August.
Gasoline futures saw added support after Reuters reported that Motiva Enterprises’ Port Arthur, Texas refinery, the nation’s largest, may be closed for up to two weeks, raising further concerns over a potential shortage of gasoline supplies.
Oil prices, meanwhile, headed higher for the first time in four sessions. They had been pressured by concerns U.S. refiners will stay shut and demand less oil, potentially leading to higher U.S. stockpiles and rekindling fears of a global supply glut.
“We see a base case of an average of 3 [million barrels a day] of refining capacity offline for the next two weeks. If imports and exports remain affected to the current degree over that time frame…the net result could be a build of up to 15 million barrels” in crude inventories, analysts at Cowen and Company wrote in a note Thursday.
The October contract for WTI crude has lost 1.5% this week so far, and is set for a 6.2% slide in August.
The Colonial Pipeline Company late Wednesday also said it was suspending service to the main pipeline that carries fuel from Texas to the East Coast.
“The closure of the Colonial Pipeline is a major disruption to the U.S. East Coast, therefore U.S. East Coast buyers are scrambling for supplies,” said Alan Gelder, vice president of research at Wood Mackenzie.
In other energy trading Thursday, natural gas for October
edged down by 1.1 cents, or 0.4%, to $2.928 per million British thermal units as a weekly EIA report revealed a rise in U.S. supplies of the commodity that generally met with market expectations.
The EIA said supplies of natural gas rose by 30 billion cubic feet for the week ended Aug. 25.