Gasoline Slips as Gulf Coast Refiners Fire Up Shuttered Plants
(Bloomberg) -- Motor fuel prices declined as traders assessed the supply implications of refinery restarts following hurricane-induced shutdowns.
Gasoline futures tumbled 1.8 percent in New York following August's 25 percent rise as Gulf Coast refiners including Valero Energy Corp. and Citgo Petroleum Corp. fired up shuttered equipment. The Environmental Protection Agency eased anti-pollution rules for 38 states and Washington D.C. to allow more varieties of gasoline to flow between markets. Meanwhile, the Energy Department approved the release of 4.5 million barrels of government-owned crude from the Strategic Petroleum Reserve to help keep refineries running.
"The government is actually reacting positively trying to address and do what they can," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. "There are some signs of life in several of the refineries already" and the tapping of the SPR "is also helping to ease anxieties over the storm."
The U.S. crude benchmark, West Texas Intermediate, ended the session at the highest level in a week.
Harvey slashed refining capacity as it moved through Texas, forcing shutdowns of key refineries from Corpus Christi to Houston to Port Arthur, including the largest U.S. fuel-making plant. At the same time, refiners such as Marathon Petroleum Corp. are trying to resume operations at their plants.
Gasoline for October delivery fell 1.8 percent to settle at $1.7479 a gallon on the New York Mercantile Exchange. West Texas Intermediate for October delivery rose 6 cents to end the session at $47.29 a barrel. Crude futures fell 5.9 percent in August, the biggest monthly decline since March.
Brent for November settlement fell 11 cents to settle at $52.75 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $4.76 to November WTI.
Back on Track
The storm also rolled into Louisiana, disrupting crude deliveries and prompting Phillips 66's request for two shipments of SPR crude for its refinery in Lake Charles. Shipments of low-sulfur crude were also approved for Valero and Marathon. The swap agreements with the government require the companies to replace the oil once supplies are flowing again.
Meanwhile, the Port of Corpus Christi in Texas lifted some restrictions to allow larger ships to enter and Magellan Midstream Partners LP resumed limited services on a segment of its Houston crude distribution system.
"There's going to be a lot of noise around Hurricane Harvey over the next few weeks, given the fact that it was obviously very disruptive," Joseph Bozoyan, a portfolio manager at Manulife Asset Management LLC in Boston, said by telephone. But "it sounds like things are getting back on track in terms of refineries coming back online and also some of the pipelines as well."
--With assistance from Ben Sharples and Rakteem Katakey
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