Tags: hurricane | refineries | oil | gasoline | gulf coast

Gulf Coast Refineries Shutter Ahead of Storm, Gasoline Soars

gas flare at an oil refinery on a dark cloudy day
A gas flare from the Shell Chemical LP oil refinery illuminates the sky on August 21, 2019 in Norco, Louisiana. (Drew Angerer/Getty Images)

Tuesday, 25 August 2020 06:32 AM

Oil and chemical facilities located along the Texas and Louisiana Gulf Coast are shuttering, securing equipment or running through emergency protocols ahead of a strong hurricane set to rip through the region this week.

Some of the largest U.S. refineries are winding down in advance of Laura, which could become a major hurricane before landfall, potentially shutting in more than 1 million barrels a day of capacity. Another storm, Marco, had been heading in a similar path, but has lost power and will likely skirt the shoreline later this week.

The double storm threat was enough to take 82% of oil production in the Gulf of Mexico offline as of midday on Monday, while also shutting in about 57% of natural gas production.

Oil and gasoline prices rallied on the disruptions, as fears that the shuttering of the key refineries would mean less availability for oil products. Gasoline futures settled 6.5% higher on the day, the biggest one-day climb since May. Meanwhile, the the spread between the prompt and second-month contracts, a closely watched indicator for supply and demand, rallied by as much as 58.8%.

Motiva Enterprises LLC is shutting both its 607,000 barrel-a-day oil refinery and chemical plant in Port Arthur, Texas, according to people familiar with the matter and a regulatory filing. Valero Energy Corp. is also shutting its 335,000 barrel-a-day Port Arthur facility, according to people familiar with the operations. Oil major Total SE is cutting crude runs by more than 50% at its 225,500 barrel-a-day refinery there. Port Arthur Mayor Thurman Bartie plans to a issue a mandatory evacuation for the city beginning at 6 a.m. local time, according to a a Beaumont TV station tweet.

A Motiva official could not immediately be reached for comment. A Valero spokeswoman said the company is monitoring the storms and assessing protocols but did not specifically comment on the shutdown. Total declined to comment on operations.

Meanwhile, at Exxon Mobil Corp., officials are readying production units for a possible shutdown at its 369,000 barrel-a-day Beaumont refinery, according to people familiar. An Exxon spokesman said the company is making preparations for any severe weather associated with the storms, though its downstream operations are normal.

At LyondellBasell Industries NV, which has a refinery in Houston, a spokeswoman said it is “assessing refining operations, securing equipment” and ensuring adequate supplies. Shell said its onshore operations remain normal, though it is one of the many companies that evacuated some personnel from offshore platforms as it shuts in production.

Phillips 66 is shutting its Lake Charles refinery on southeast Louisiana Gulf Coast as the latest forecasts have Laura aimed at the southeast Louisiana Gulf Coast and across the border into southwest Texas, both home to a number of refineries.

Traders and investors will likely continue monitoring Tropical Storm Laura, which, if it develops into a Category 3 storm, would be the first major Atlantic hurricane of the year. The impacts of the refinery outages on the market will depend a lot on the path of the hurricane and other logistical factors like how long it lingers and whether serious flooding takes place, according to RBN Energy’s David Braziel.

“Total inventories are up above 5-year highs for crude, distillate and gasoline,” said Braziel. “And in most cases at record highs, which would help to mitigate the impacts if the infrastructure to deliver either feedstocks or refined products are disrupted.”

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Oil and chemical facilities located along the Texas and Louisiana Gulf Coast are shuttering, securing equipment or running through emergency protocols ahead of a strong hurricane set to rip through the region this week. Some of the largest U.S. refineries are winding down in...
hurricane, refineries, oil, gasoline, gulf coast
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2020-32-25
Tuesday, 25 August 2020 06:32 AM
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