Arizona Gas Prices May Go Up After Hurricane Harvey Damage

Chelsea West
September 3, 2017

Western Canadian Select strengthened on Thursday, with the discount to futures shrinking 50 cents to $11.25 a barrel, data compiled by Bloomberg show.

Gasoline for October delivery fell to $1.7378 a gallon on the New York Mercantile Exchange at 1:41 p.m.in London.

That refinery has not been affected by the storm, which has hammered the Gulf Coast for several days. According to S&P Global Platts, Mexico - a large buyer of US Gulf Coast refined products - has turned to refineries along the Canadian and US Atlantic Coasts for fuel supply.

The flooding has also knocked out trucking routes to gasoline stations, and many stations in Texas and Louisiana are out of fuel or flooded.

The release includes 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil, the statement said.

Gasoline stocks USOILG=ECI rose by 35,000 barrels, compared with analysts' expectations in a Reuters poll for a 1.0 million-barrel drop. It normally pumps out 560,000 barrels of oil a day.

By comparison, last year, consumers paid an average of just $2.22 a gallon across the country to fill up their tanks before heading out on Labor Day sojourns.

Harvey shut about 4.4 million barrels a day of refining capacity, nearly a quarter of the USA total, as it plowed through Texas and western Louisiana.

Phillips 66, which earlier this week requested an emergency shipment from the Strategic Petroleum Reserve, has asked for a Jones Act Waiver. Gasoline prices in the region were $16.34 a barrel, also the highest since January 2016.

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By 4:36pm EST, WTI was trading at $46.38 with Brent Crude trading at $51.96.

Meanwhile, offshore drilling in the Gulf has fallen off since the shale boom took off more than 10 years ago, shifting more production inland to less hurricane-prone areas like the Permian Basin.

"The market has turned in reverse pretty sharply", said Gene McGillian, anager of market research at Tradition Energy. "It's a business and if you don't want to spend it, then I guess don't drive", Samarah said.

Harvey shows just how important the US has become to the world's energy supply. They are now 14.5 percent below the record levels hit in March. The API reported that oil reserves in the country for the week ended on August 25, decreased by 5.78 million barrels, to 457.42 million barrels.

US crude's discount to London's Brent futures grew Tuesday, touching the contract's widest level of $5.90 a barrel. "But by the end of September, I expect the situation to be nearly back to normal", said Frank Schallenberger, head of commodity research at LBBW.

Analysts at Goldman Sachs and Stifel said they expected USA infrastructure outages to last several months but said it was hard to estimate the exact damage. Others said higher gasoline prices might prompt operational refineries to delay typical September seasonal maintenance.

The impact will be felt even further downstream in the global industrial and manufacturing sectors as over half of the United States' petrochemical infrastructure, the basis for chemicals and plastic products, remains offline.

Damage from Hurricane Harvey has continued to unsettle crude oil prices, although prices have attempted a limited recovery.

Other reports by TheSundaySentinel

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