US releases 1 million barrels of Strategic Petroleum Reserve

US releases 1 million barrels of Strategic Petroleum Reserve

US releases 1 million barrels of Strategic Petroleum Reserve

Earlier this week, the Department of Energy released 500,000 barrels from its Strategic Petroleum Reserve to a Phillips 66 refinery in Louisiana to make up support the shortfall from offline facilities in Texas. On Friday, as two refineries began to restart and some ports reopened, gasoline futures fell 2 percent and the crack spread RBc1-CLc1 fell more than 5 percent.

But in recent months those expectations dimmed.

Backwardation, when the front-month contract is more expensive than subsequent months, makes it uneconomical to store crude, resulting in the drawdown of inventories. That would have been a 14 percent increase, taking US output to a level not seen since the 1970s.

Harvey has taken 25 percent of oil and natural gas production offline

The Organization of the Petroleum Exporting Countries is frustrated that the storm has not pushed global prices higher, with one OPEC delegate telling Reuters, "It seems no event will move the oil price up much".

But Hurricane Harvey has nipped this hope in the bud, at least for now.

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

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Damage and delays from Tropical Storm Harvey will hold the U.S. oil industry back from achieving a targeted 10 million barrels per day of production anytime soon, according to analysts, a setback in America's fight for global market share with Organization of the Petroleum Exporting Countries (OPEC).

The shutdown of nearly a quarter of United States crude refining capacity in the wake of Hurricane Harvey is presenting a rare opportunity for fuel traders in Asia.

Tankers have been booked to transport gasoline from Europe to the U.S., and the fuel is now set to be shipped over even longer distances as the premium of American prices soar relative to those in Asia, the world's biggest oil market. "The impact of Harvey adds to existing woes".

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As of the close on Wednesday, WTI was at $45.96 a barrel, some $4.90 below Brent, a far bigger discount than the $2.62 that prevailed at the start of August. "This will have a double-impact on refinery margins, especially in Asia".

While Asia's imports of USA light crude will no doubt be lower in October and November because of the hurricane's impact, they may come back strongly in subsequent months. Most major Texas ports remained closed to large vessels, limiting discharge of imported crude. In January, the Energy Department accepted a bid by Phillips 66 to buy crude from the reserve, the first sale of government crude since 2014. Production was cut back on Tuesday as Harvey drenched the area.

There is little doubt that Harvey has complicated the efforts by OPEC and its allies to force global inventories lower, but if they respond by tactically allocating different grades of crude among customers, it could still work to their benefit.

Fuel Costs Soar Nationally And Across Southeast In Harvey's Wake
Prices at pumps are rising by 8-10 cents per gallon to an average of $2.45, according to the American Automobile Association. Citgo Petroleum Corp said it was moving to restart its 157,500-barrel-per-day (bpd) refinery in Corpus Christi, Texas.

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