Texas Refineries Avoid Brunt of Laura
(Bloomberg) -- Oil declined as Hurricane Laura barreled into Louisiana, avoiding widespread disruption to key energy infrastructure along the Texas Gulf Coast.
Laura made landfall early Thursday near Cameron, Louisiana, as a Category 4 storm and has started weakening. While it knocked out power to hundreds of thousands of people and impacted plants that produce chemicals and liquefied natural gas, southeast Texas ports and refineries -- including the largest U.S. refinery -- likely avoided the worst of it.
Crude futures in New York fell as much as 2.4% on Thursday, while gasoline futures dropped as much as nearly 7%. A stronger dollar also reduced the appeal for commodities priced in the greenback.
“The damage is not as bad as anticipated, which is creating more sell pressure along the energy complex,” said Phil Flynn, senior market analyst at Price Futures Group. “The lower price of gasoline means worse refining margins potentially, meaning that there’s not going to be a lot of incentive to use a lot of crude quickly.”
As the storm passes, traders are assessing the potential impact on both fuel production and consumption. Exxon Mobil Corp.’s Beaumont refinery on the Texas Gulf Coast will begin restarting Friday if an assessment shows no damage from Hurricane Laura, while its Baytown refinery on the Houston Ship Channel has already begun the restart process.
More than 80% of oil output in the Gulf of Mexico and almost 3 million barrels a day of refining capacity had been shut ahead of the storm, causing a spike in gasoline futures prices earlier this week. Since then, prices have retreated. Aside from the storm impact, a persistent inventory overhang as the coronavirus depresses demand continues to cloud the outlook for a sustained rebound in prices.
Prices
- West Texas Intermediate for October delivery declined 74 cents to $42.65 a barrel at 10:54 a.m. in New York.
- Brent for the same month was down 82 cents at $44.82 a barrel.
- Nymex gasoline futures fell 5.7% to $1.2828 a gallon.
- The Bloomberg Dollar Spot Index rose as much as 0.3%.
Meanwhile, bookings for tankers to ship gasoline from Europe to the U.S. surged this week. So far, 13 tankers were booked to load gasoline in Europe with the U.S. listed as a destination, according to shipping fixtures compiled by Bloomberg.
Other market drivers
- The UAE’s output plan for October will be a “massive” 900,000 barrels a day above its OPEC+ quota, consultant Energy Aspects said in a report, citing people it didn’t identify.
- Saudi Aramco appointed a new chief executive officer to run its $500 million venture capital and investments arm after the previous head departed, according to people with knowledge of the situation.
--With assistance from Ben Sharples, James Thornhill, Ann Koh and Alex Longley.
© 2020 Bloomberg L.P.
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