IHS Markit says in a report that on Sept. 19, 15 of the 20 refineries affected by Hurricane Harvey in Texas are at or near normal operating rates. Four of the other five are actively in the process of restarting and ramping up runs.
The NYMEX RBOB spot price was essentially back to its pre-Harvey level. However, this price recovery was far slower than for any previous hurricane, underscoring the fact that Harvey was the single greatest disruptive event to ever afflict the U.S. refining industry.
U.S. fuels markets
Currently the U.S. retail average gasoline price stands at $2.615/gal after falling over the past several days. Some of the Southeast states that have jumped the most in the post-Harvey environment have mirrored the national average decline.
Florida has been one of the states that has been more slow to react to the downdrafts as average prices are down about a penny week on week near $2.70/gal.
The U.S. Energy Information Administration (EIA), in its weekly statistical bulletin, is likely to show another gasoline draw. The previous week’s report showed the highest draw on record at 8.4 million bbl in the U.S. highlighted by large draws on the East Coast and Gulf Coast (PADDs 1 & 3). The draw may be a bit smaller than the previous week as imports are likely to start arriving and the waiving of mandatory Jones Act vessels between U.S. ports has offered a bit of breathing room.
Gasoline demand over the past week or so has behaved as expected, in a post-Harvey, pre-Irma environment. According to IHS Market subsidiary OPIS, data that tracks retail gasoline volumes at more than 10,000 stations nationwide, demand destruction was evident in the southwest (which includes Texas) and a spike in the southeast (including Florida, Georgia and South Carolina).
According to data for the week ending Sept. 9, southwest gasoline demand was down more than 21 percent from the prior week. The post-Harvey demand destruction was a function of flooded roads, closed offices and businesses as well as stations that were not operating.
Meanwhile, pre-Irma evacuations provided a spike in gasoline demand of nearly 19 percent in the southeast. Refiners have focused squarely on getting more regular gasoline to the market and as a result, premium gasoline and diesel supplies have tightened significantly.
Last week’s EIA Weekly Petroleum Status Report estimated that U.S. crude oil production had rebounded to nearly 9.4 MMb/d, up from 8.8 MMb/d, indicating a quick upstream recovery from Hurricane Harvey.
Based in part on data and guidance from U.S. onshore operators—who are responsible for most of the growth in total U.S. crude output—IHS Markit expects U.S. production to continue rising through the end of the year.
Unsurprisingly, EIA data also show that U.S. crude oil inventories have risen by more than 10 million barrels over the past two weeks, almost entirely in the U.S. Gulf Coast and Cushing, Oklahoma. Another crude stock build is likely in this week’s report, since it may reflect a surge of imported crude into re-opened Gulf Coast ports as cargoes delayed by the storm unload.
The Brent-WTI spread still remains above $5 per barrel, compared to about $3 before Harvey, reflecting the relative crude imbalance between the U.S. Gulf and the international market. At the same time there has been increased tightness in the Brent market, reflecting higher European refinery activity in response to stronger margins caused by U.S. refinery outages.
IHS Markit expects the Brent-WTI spread will normalize back to its pre-storm level as refining activity returns to normal and crude export volumes ramp up. Additionally, the wide spread is likely discouraging additional imports into the U.S., so imported volumes may eventually subside.
The reopening of the Zydeco pipeline, which can deliver as much as 325,000 b/d of crude from Texas to Louisiana, is another factor that should help alleviate the Texas crude bottleneck.
Natural gas liquids (NGLs)
Nearly one month after the hurricane, it appears that there was no long term damage to NGL supply from either gas plant or refinery operations.
The Enterprise Mont Belvieu complex suffered a slight setback on September 15th when it suffered a fire at its West Storage facility at its Mont Belvieu fractionation complex. Enterprise Products Partners said on Monday that a fire late on Friday had minimal impact on its natural gas liquids operations with minimal damage to equipment at Mont Belvieu in Texas. Repairs are expected to be completed in the fourth quarter, the company said.
NGL export capacity is back online with terminals now loading cargos. The return of exports from the U.S. Gulf Coast has led to downward pressure to the Japan to Mont Belvieu LPG differentials.
The complete report is available at http://bit.ly/2wyqfXD