Retail US Gasoline Prices Surge After Harvey, Global Impact Felt
HOUSTON/NEW YORK, Sept 1 (Reuters) - Retail U.S. gasoline prices surged to two-year highs on Friday and global shipping routes were scrambled, even as some of the nation's oil refineries began restarting in the wake of Hurricane Harvey.
Major fuel pipelines feeding the U.S. Northeast and Midwest were shut or severely curtailed, prompting shortages and dramatic spikes in wholesale cash prices that pushed the national retail average to $2.519 a gallon, the highest since August 2015.
Harvey, which raked across the Texas Gulf coast a week ago, has roiled global fuel markets. Tankers carrying millions of barrels of fuel have been rerouted to the Americas to avert shortages. European refining margins hit a two-year high amid the surge in exports.
Effects of the storm will continue for weeks, if not months, after record rains and flooding in Houston and the U.S. energy hub. It knocked out about 4.4 million barrels of daily refining capacity, slightly more than Japan uses daily, and only some restarts have begun so far.
On Friday, the U.S. Energy Secretary approved an additional release of crude oil from the Strategic Petroleum Reserve, adding 3.5 million barrels on top of the 1 million barrels approved as of Thursday.
The Explorer Pipeline, which hauls fuel from the U.S. Gulf Coast to the Midwest region, said it aimed to restart its main lines this weekend as refineries indicated they would be able to resume supplies.
Marathon Petroleum Corp's Galveston Bay Refinery in Texas City, Texas, had raised production to 45 percent of its 459,000 bpd capacity, sources told Reuters.
In Corpus Christi, where Harvey first made landfall, Citgo Petroleum Corp said it was beginning to restart its 157,500-barrel-per-day (bpd) refinery, while Flint Hills Resources and Valero Energy Corp were also moving to restart their plants, sources said.
LIGHT AT END OF TUNNEL
Benchmark U.S. gasoline futures had surged more than 15 percent since the storm began. But on Friday, U.S. gasoline margins <RBc1-CLc1> tumbled nearly 5 percent and gasoline futures fell by just under 2 percent, their first daily loss since the storm hit.
"Yesterday, the anxiety over Harvey reached a crescendo," said John Kilduff, partner at energy hedge fund Again Capital LLC, adding that with the restarts, "you can see the light at the end of the tunnel."
The biggest U.S. refiner, Motiva's Port Arthur facility, which can handle 600,000 barrels of crude daily, will be shut for at least two weeks, however, according to sources familiar with plant operations. (Graphic: http://tmsnrt.rs/2xzsKWz)
Other plants in the Beaumont/Port Arthur area are expected to face similar challenges restarting as waters continue to rise, even as flooding receded in Houston, some 85 miles (137 km) west.
The national average for a regular gallon of gasoline rose to $2.519 as of Friday morning, the highest since August 2015. That marks a 17.5-cent increase since Aug. 23, before the storm began, according to motorists advocacy group AAA. Even stiffer increases were reported in the U.S. Southeast, which relies heavily on Gulf supplies.
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