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Oil benchmarks pulled in opposite directions as Harvey skews market
by Daniel J. Graeber
Washington (UPI) Aug 28, 2017

Half of regional refining capacity sidelined by Harvey
Washington (UPI) Aug 28, 2017 - With as much as 4 feet of rain expected in some areas, Tropical Storm Harvey sidelined about half of the regional refining capacity, industry reports said.

Harvey strengthened to a Category 4 storm during the weekend, but has since dissipated to a tropical storm with historic rains. The National Hurricane Center in Miami, Fla., reported the storm moving slowly northeast with sustained winds near 40 miles per hour. Harvey could gain strength late Monday or Tuesday and soak parts of the Houston metropolitan area with as much as 4 feet of rain.

Apache Corp. was just one of the companies in the region monitoring the situation.

"Apache's Houston office will be closed Monday, Aug. 28, due to flooding in the Houston area," the company stated.

The overall impact to the nation's energy sector is widespread. According to oil pricing group S&P Global Platts, at least 10 refineries have been or are in the process of being shutdown. About half of the region's refining capacity was idled by the storm.

Offshore, Anadarko Petroleum, one of the largest regional operators, said its offices inland were closed, but crews were returned to four platforms. Personnel were kept off three others until Harvey clears out.

In its latest update, British energy company BP said two of its platforms were operating at reduced rates because of storm-related closures to regional pipeline infrastructure.

"However, we continue to export crude from the facilities via alternate pipelines," the company said in a statement.

Platts estimated about a quarter of the U.S. offshore crude oil production was impacted by the storm. Inland, operators are closing wells down because many of the nation's most lucrative shale basins are in Harvey's path. The Eagle Ford shale basin, which accounts for about 10 percent of the total amount of crude oil produced daily in the United States, sits directly in the storm's path.

The United States could tap into its Strategic Petroleum Reserve to compensate for the shortages or rely on more imports. So far, the government hasn't issued orders for an SPR release. There are 678 million barrels stored currently in the strategic reserve.

The nation-wide average retail price for a gallon of gasoline is up only slightly from last week, though it will likely take several days for the refinery and production outages to make their way to the consumer level.

Asked how long it would take for the refinery situation to return to normal, Patrick DeHaan, a senior petroleum analyst with GasBuddy, told UPI it would be at least a few weeks, "maybe more than a month depending on how quickly flood waters in Houston recede."

Crude oil benchmarks were pulled in opposite directions early Monday as Tropical Storm Harvey battered the U.S. coast while global economies improved.

Harvey sidelined about half of the regional refining capacity because of historic flooding. As much as 4 feet of rain is expected in the Houston metropolitan area and the Eagle Ford shale basin, which accounts for about 10 percent of the total U.S. daily production, is directly in the storm's path.

Energy companies working in the Gulf of Mexico, which accounts for about a quarter of total U.S. production, are starting to return staff to some offshore platforms as Harvey moves inland. Vandana Hari, an industry analyst and founder of Vanda Insights, said in a daily newsletter the market was "not too concerned" by any Harvey-related shortages in crude oil supply.

"The lower crude availability will be partly mitigated by reduced demand from the refining system as a result of some of the capacity being offline," she said. "Besides, U.S offshore crude supplies and imports could be restored sooner, given the preliminary assessment of no major damage sustained at the production platforms and import/export terminals."

This means U.S. crude oil supplies could recover before the refineries are back in action. Gasoline futures, meanwhile, were up about 6 percent from Friday's close, signaling upward pressure at the consumer level later this week. Any spike at the pump would come just as U.S. motorists gear up for the last major holiday of the summer travel season and Harvey may wind up influencing demand.

West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.79 percent at 9:13 a.m. EDT to $47.49 per barrel. Brent crude oil, the global benchmark, was up 0.17 percent to $52.50 per barrel.

"Brent crude is strong as European refineries ramp up activity to replace U.S. product imports and reports of shut production in Libya," Phil Flynn, senior market analyst for the PRICE Futures Group in Chicago, said in response to emailed questions.

Libya is exempt from a program led by the Organization of Petroleum Exporting Countries to drain a surplus on the five-year average of global crude oil inventories through managed declines. Small fits and starts from Libya, therefore, have big market implications.

On the economic front, the Organization for Economic Cooperation and Development said quarterly growth in real gross domestic product for its members was up 0.7 percent in the second quarter, compared with 0.5 percent in the previous quarter. Japan led the pack with a jump from 0.4 percent to 1 percent, while the British economy shrank from 0.3 percent to 0.2 percent in the second quarter. GDP in the United States, the world's leading economy, grew from 0.3 percent to 0.6 percent.

"Year-on-year GDP growth for the OECD area accelerated to 2.4 percent in the second quarter of 2017, compared with 2.1 percent in the previous quarter," its preliminary estimate for the second quarter read.

Norway's Statoil takes first steps into Argentina's lauded shale
Washington (UPI) Aug 25, 2017
Norwegian energy company Statoil said Friday it signed an agreement with Argentine company YPF to explore parts of the "world-class" Vaca Muerta shale basin. Statoil under the terms of the agreement took a 50 percent stake in the Bajo del Toro exploration permit in the Neuquén Basin alongside YPF. The Norwegian company said it would fund all of the costs associated with activities in t ... read more

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