Economy

Gasoline gains, crude drops as Storm Harvey poised for comeback

Gasoline gains, crude drops as Storm Harvey poised for comebackā€

In the bigger picture, the mid-August low of $46.46 is now within striking distance. "If you get closer to $49, you may see some longs being added for that potential break-out and if you start coming off pretty hard, you may see some shorts start getting back into the market".

USA shale is again cited as the chief driver of oil market conditions. Additional resistance is seen near a downward sloping trend line that comes in near 49.50. There are reports that oil tankers are idling offshore in the Gulf, but they will likely have to wait a little while longer before they can dock.

The storm was also putting a damper on demand throughout the Gulf Coast region, and the closing of refineries and pipelines in Texas was creating a glut for pipelines further north that ordinarily funnel supplies to Gulf Coast refiners. Another 15 to 25 inches of rain is possible by Friday, so the worst of the flooding is not over.

The window for shipping is closing as conditions deteriorate and Harvey moves east toward refineries and ports in the state.

"What is more, oil production is likely to be ramped up more quickly again than crude oil processing". Crude futures through next year are getting battered. The region includes the St. James trading hub, with more than 2.5 million barrels per day (bpd) of refining capacity. Traders still focused on the destructive wake of Tropical Storm Harvey in the Houston area, which has forced several major oil refineries to shut down, leaving the crude market with fewer buyers for now. "If the refineries stay shut for more than a week or 10 days, it's going to be very problematic".

Pasadena (112,229 bpd), Phillips66 Sweeny (247,000 bpd) and Valero Three Rivers (89,000 bpd) facilities have also been temporarily closed.

Texas is home to 5.6 million bpd of refining capacity, and Louisiana has 3.3 million bpd. The Colonial pipeline that supplies much of the northeastern United States remained open, but analysts were watching that closely since part of the pipeline begins in waterlogged Houston.

Analysts polled by S&P Global Platts expect the EIA to report a decline of 1.5 million barrels in crude inventories, along with declines of 1.9 million barrels for gasoline and 600,000 barrels for distillate supplies.

Sharara stopped pumping oil a week ago, after a militant group seized control of the pipeline that feeds crude from it to the Zawiya export terminal, and is still idle, a person familiar with the situation. The 280,000-bpd Sharara field, the OPEC member's largest, has been shut for around a week.



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