Tags: Sandy | oil | demand | destruction

Demand for Oil After Sandy Expected to Fall

Tuesday, 30 Oct 2012 09:01 AM

Demand for oil and fuels might fall in the wake of Sandy, which roared ashore as a monster hybrid weather system inflicting damage with winds, rain and a deadly storm surge, though gasoline prices could rise if supplies remain cut off for too long, experts say.

Refineries throttled back output ahead of the storm, curtailing demand for crude oil.

Meanwhile, demand for gasoline and diesel will fall, for now, as commuters remain hunkered down assessing damage, forgoing driving to work or elsewhere, especially if power outages drag on.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

But fuel prices could rise if motorists hit the road again before refineries ramp back up.

“With all these big closures of all these refiners on the East Coast, it’s not a surprise that you’re going to see crude a little bit lower and unleaded gasoline higher,” CME floor trader Tres Knippa of Kenai Capital Management told CNBC.

Other experts agreed, pointing out that Sandy could apply longer-term bearish pressure on crude prices if the economy suffers.

“While the storm will shut down 6.5 percent of U.S. refining capacity and motorists will top off their tank, the shutdown of major cities and the expected power outages may take a toll on demand unlike anything we have seen before,” said Phil Flynn, senior market analyst at The PRICE Futures Group, CNBC added.

“The impact on demand may not last for hours, but more than likely for days. This could be the biggest demand destruction event in history. The East Coast is by far the largest consumer of gasoline."

Others see a short-term spike in gasoline prices if refineries remain closed for too long and strain supplies.

A refinery run by Philadelphia Energy Solutions processes 330,000 barrels of oil a day, but is running at reduced rates, CNNMoney reported.

Northeastern refineries operated by Phillips 66, Hess and NuStar have been completely shut down.

Unlike with Hurricane Katrina, when European refineries could make up for the shortfall, production snags overseas could strain supply if facilities don’t ramp up quickly enough, other experts point out.

“We don’t have the fallback we had during Hurricane Katrina,” said Stephen Schork, editor of The Schork Report, a daily research letter on the energy markets, CNNMoney added.

“If we see a one-week delay in output, the good times might be over.”

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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Demand for oil and fuels might fall in the wake of Sandy, which roared ashore as a monster hybrid weather system inflicting damage with winds, rain and a deadly storm surge, though gasoline prices could rise if supplies remain cut off for too long, experts say.
Sandy,oil,demand,destruction
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2012-01-30
Tuesday, 30 Oct 2012 09:01 AM
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