A hurricane in the heart of the U.S. energy industry is set to curtail near-record U.S. oil production for several weeks, with the impact expected to reverberate throughout the country and across international energy markets.
Harvey hit the Texas shore as a fierce Category 4 hurricane, causing massive flooding that has knocked out 11 percent of U.S. refining capacity, a quarter of oil production from the U.S. Gulf of Mexico, and closed ports all along the Texas coast, reports Reuters.
Gasoline futures jumped as much as 7 percent to their highest level in more than two years in early Monday trading in Asia as traders took stock of the storm’s impact.
The outages will limit the availability of U.S. crude, gasoline and other refined products for global consumers and further push up prices, analysts said.
Damage assessments could take days to weeks to complete, and the storm continues to drop unprecedented levels of rain as it lingers west of Houston, home to oil, gas, pipeline and chemical plants. And restarts are dangerous periods, as fires and explosions can occur.
So far, the federal government has not announced if it will release barrels of oil or refined products from the nation’s Strategic Petroleum Reserve (SPR), which holds nearly 680 million barrels of oil.
The SPR was established in the 1970s to prevent supply shocks in the wake of an embargo imposed by several members of the Organization of the Petroleum Exporting Countries (OPEC).
“This is not like anything we have ever seen before,” said Bruce Jefferis, chief executive of Aon Energy, a risk consulting practice. It is too soon to gauge the full extent of Harvey’s damage to the region’s energy infrastructure, he said.
More than 30 inches (76 cm) fell in the Houston area in 48 hours and a lot more rain is forecast, according to the National Weather Service.
The storm was felt from coastal ports to inland oil and gas wells. Oil producers in the Eagle Ford shale region of south Texas have halted some operations.
At least four marine terminals in the Corpus Christi area, an export hub for energy deliveries to Latin America and Asia, remained closed due to the storm.
