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Oil prices continue downward trend triggered by Harvey
by Daniel J. Graeber
Washington (UPI) Aug 30, 2017

Flooding from Harvey the biggest risk to U.S. energy sector
Washington (UPI) Aug 30, 2017 - Refinery problems tied to the flooding from Tropical Storm Harvey and pipeline outages pose the biggest source of sector disruptions, Goldman Sachs said.

Tropical Storm Harvey picked up pace and strength as it moved out of southern Texas overnight. The storm is on track to move east toward Louisiana and the Lower Mississippi Valley through Friday. The threat of flooding for the Houston metropolitan area has ebbed and southwestern Louisiana is expecting as much as 6 inches of rain. As much as 5 feet of rain was forecast earlier this week for Houston.

"Flooding continues and is now the greatest threat to the U.S. Gulf Coast energy infrastructure where it is leading to further refinery outages and port closures even as some production starts to come back online," an emailed report from Goldman Sachs read. "We view persistent refinery and midstream capacity outages as the two biggest potential sources of sustainable disruptions, in turn creating risk that the ongoing recovery in production will only be partial."

The latest estimate from pricing group S&P Global Platts found a dozen petrochemical complexes shut because of the storm and all of those are in Texas. The largest crude oil refinery in the country, Motiva's 603,000 barrel per day facility in Port Arthur, Texas, started shutting early Wednesday morning.

"At 5 a.m., Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions," the company said in a statement emailed to UPI. "Return to service is contingent upon recession of flood waters in the area."

By Monday, about 2.2 million barrels per day of Texas refining capacity was down because of Harvey. That represents about 12 percent of the total U.S. refining capacity. Goldman Sachs estimated about 3.9 million barrels of refining capacity across the entire region was down and Platts added that vessel traffic in and out of the U.S. Gulf Coast was largely closed because of the storm, crimping imports and exports.

"All ports near the storm are now closed," Goldman's report read.

On the production side, Goldman said U.S. output might not be able to recover if there's widespread damage to industrial facilities, storage areas and pipelines. For refineries, the report said about 10 percent of the total capacity might be offline for several months, based on comparisons from Hurricanes Rita and Katrina.

With the largest refinery in the United States closed Wednesday, crude oil prices continued to bear the brunt of Tropical Storm Harvey.

"At 5 a.m., Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions," the company said in a statement emailed to UPI. "Return to service is contingent upon recession of flood waters in the area."

Motiva's facility has the capacity to process about 600,000 barrels of oil per day and the closure adds to the growing number of facilities closed because of the storm. Harvey is moving east toward refinery centers in Louisiana and a research note from Goldman Sachs said as much as 10 percent of the regional refinery capacity could be offline for several months, based on comparisons from Hurricanes Katrina and Rita.

Crude oil prices have moved lower for much of the week in response to the tropical storm. Phil Flynn, senior market analyst for the PRICE Futures Group in Chicago, said in response to emailed questions that prices are down because about 16 percent of total U.S. refining capacity is offline and crude oil levels are backing up in the storage hub at Cushing, Okla.

The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.95 percent to $46 per barrel as of 9:15 a.m. EDT. Brent, the global benchmark, was down 0.9 percent to $51.53 per barrel.

Brent is down about 2 percent and WTI is down 7 percent from the start of August. Flynn said crude oil prices will likely climb if the attention shifts from refinery outages to any damage to oil and gas production facilities.

Markets may react to official data from the U.S. Energy Information Administration on oil and gasoline inventories last week, though the market reaction to industry data from the American Petroleum Institute late Tuesday was muted. A forecast from pricing group S&P Global Platts predicted gasoline stocks declined 1.9 million barrels and crude oil inventory levels dropped 1.5 million barrels from last week.

Data next week will provide a better indication of the extent of the damage to the U.S. energy sector from Tropical Storm Harvey.

Elsewhere, the U.S. Commerce Department reported real gross domestic product increased at an annual rate of 3 percent during the second quarter, the strongest growth in more than two years. First quarter real GDP growth was 1.2 percent.

"With this second estimate for the second quarter, the general picture of economic growth remains the same," the Commerce Department's notice read.

Oil and gas wells as a strong source of greenhouse gases
Kiel, Germany (SPX) Aug 29, 2017
The pictures went around the world. In April 2010, huge amounts of methane gas escaped from a well below the Deepwater Horizon platform in the Gulf of Mexico. This "blow-out" caused an explosion, in which eleven people died. For several weeks, oil spilled from the damaged well into the ocean. Fortunately, such catastrophic "blow-outs" are rather rare. Continuous discharges of smaller amounts of ... read more

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