INTERNATIONAL - Crude oil slid and petrol futures hit their highest since mid-2015 yesterday as flooding and damage from tropical storm Harvey shut nearly a fifth of US refineries, curbing demand for crude while raising the risk of fuel shortages.
Refineries with output of 4.1million barrels per day (bpd) went off-line on Tuesday, cutting off 23% of US production, Goldman Sachs said. Restarting plants even under the best conditions can take a week or more.
“It will be a while before operations can return to normal and the US refining industry is bracing itself for an extended shutdown,” Stephen Brennock of oil broker PVM said. Brent oil, the international benchmark for crude trading, was down 43c at $51.57 (R671.38) a barrel and crude fell 25c to $46.19. The largest refinery in the US was shutting because of flooding, sources familiar with operations said.
“Crude is always easier to replace than products,” said Olivier Jakob, analyst at Petromatrix. “If the refineries stay shut for more than a week or 10 days, it’s going to be very problematic.” Harvey made landfall on Friday as the most powerful hurricane to hit Texas in more than 50 years, resulting in the death of at least 17 people.
In addition to shutting oil refineries, about 1.4million bpd of US crude production has been disrupted, equivalent to 15percent of total output, Goldman Sachs said. The impact of the storm overshadowed the latest weekly figures on US oil supplies from the American Petroleum Institute. US crude inventories fell 5.78 million barrels last week, it said on Tuesday.