Harvey's wake tempers bullish outlook for USA oil output growth

Harvey's wake tempers bullish outlook for USA oil output growth

Gasoline prices have increased by at least 10 cents a gallon since Harvey came ashore and caused record flooding, shutting down oil refineries along the Texas and Louisiana coasts.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $45.84 per barrel at 0024 GMT, down 12 cents, or 0.3 percent, from their last close.

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Crude oil prices rose slightly Thursday, contrary to the expectations of the Organisation of Petroleum Exporting Countries (OPEC), as oil traders focused more on Hurricane Harvey's hit on oil demand than the impact on supply disruptions.

Hurricane Harvey, which brought record flooding to the US oil heartland of Texas and killed at least 35 people, has paralysed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

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The EIA (U.S. Energy Information Administration) estimates that USA crude oil production rose by 2,000 bpd (barrels per day) to 9,530,000 bpd between August 18 and 25, 2017.

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The Explorer Pipeline, which hauls fuel from the U.S. Gulf Coast to the Midwest, targeted a restart of its main lines on Sunday and Monday.

Colonial said Thursday it was closing its pipelines delivering diesel, petrol and aviation fuel to the U.S. northeast, owing to outages at pumping points and lack of supply from refiners.

About 4.4 million barrels of USA refining capacity have been shut by Harvey, including the nation's largest refiner, Motiva Port Arthur, which can process more than 600,000 barrels a day.

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Benchmark U.S. gasoline futures surged more than 15 percent after Harvey hit.

But market rebalancing may take longer than expected if production comes back in the United States and refiners can not feed that output into flooded refineries. The storm's impacts sent gasoline prices soaring but also crimped demand for crude. In Europe, benchmark gasoline margins jumped to a two-year high of almost $20 per barrel. It has since soared another 30 cents per gallon and AAA said the Southeast in particular could be facing higher prices at least into September. The oil will be delivered via pipeline to the Phillips 66 refinery in Westlake, LA.

The price rise reflected the concentration of so much of the USA oil refining industry in the state of Texas where it was hit hard by the record-setting hurricane, Bohanon explained. The Colonial Pipeline announced Wednesday evening it expects to temporarily suspend its gasoline, diesel and jet fuel pipelines.

The market shrugged off weekly inventory figures from the U.S. Energy Department, which reflect stocks prior to the storm.

That artery can carry 3 million barrels of gasoline and other products daily. That means pumps will be intermittently run out of gas, till they can get more fuel trucked in from large storage terminals that get fuel directly from refineries along the Gulf Coast.

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On Wednesday, industry sources told Reuters that Shell staff are reboarding the Perdido oil and gas platform in the Gulf of Mexico in preparation for a restart.

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