Hurricane Harvey Tosses Global Oil Markets Into Chaos

People push a stalled pickup truck biển công ty through a flooded street in Houston, Texas after Hurricane Harvey, August 27.
Charlie Riedel/AP




The most powerful Hurricane to hit Texas in more than 50 years has devastated much of the coast, and the historic flooding is now causing havoc in Biển mica hộp đèn the energy markets.

The rain is not over, and will continue
 
over the next few days, spilling a year's worth of rain within a week.

ExxonMobil shut down
its Baytown refinery, the second largest in the United States with a capacity of 560,500 barrels per day (BPD)
. Royal Dutch Shell closed its 360,000 bpd Deer Park refinery, according to Sutm_medium=Social" rel="nofollow">Reuters
.

Worse, refined product output in Latin America has fallen recently, with Mexico and Venezuela most vulnerable to supply outages in Texas.

"If there are a lot of shutdowns, whatever capacity is running will get consumed in the US, it will have to be, so Latin America biển công ty will have to get its barrels from elsewhere. It creates a domino effect," Vikas Dwivedi, global oil and gas strategist at Macquarie, told Reuters.

That domino effect will push up refining margins worldwide. "If (US) refineries shut down for more than a week, Asia will need to run at a higher level, because there's no spare capacity in Europe," Olivier Jakob, managing director of Petromatrix said in an interview with CNBC
.

Texas imported 1.9 mb/d of crude oil in May, while the Gulf Coast also exported 0.75 mb/d. The port outages will wreak havoc on oil differentials - Gulf Coast refiners import heavier crude to process, while coastal ports export lighter oil coming from Texas shale fields to customers overseas. In the short run, the US could see a bit of a glut of lighter forms of oil, while heavy oil producers overseas will be hit by a temporary interruption of purchases from Texas refiners. There are reports that oil tankers are idling offshore in the Gulf, but they will likely have to wait a little while longer before they can dock.

Those disruptions could also inflict pain on upstream shale producers. SP Global Platts says that an estimated 378,633 bpd of oil output was knocked offline as of August 27, or about a fifth of the total production in the Gulf of Mexico, while a quarter of the region's natural gas output was also sidelined.

More than 100 oil platforms in the Gulf were evacuated
, although those platforms will probably come back online much quicker than the onshore refineries.

The damage to upstream shale production onshore is a bit more uncertain, although could be significant. ExxonMobil's shale unit, XTO Energy, shut in all production that was situated in Hurricane Harvey's path, although production details were not provided. S&P Global Platts says that thousands of wells could be affected in the Eagle Ford in South Texas, and Platts Analytics' Bentek Energy says that the Eagle Ford is currently producing 1.34 mb/d, which is down slightly from the 1.41 mb/d the region is expected to average this month, according to EIA data
.

Hurricane Harvey was one of the worst in Texas' history, but even as the winds die down, the damage from rain remains. Another 15 to 25 inches of rain is possible by Friday, so the worst of the flooding is not over.