Crude slips, gasoline jumps as storm shuts a fifth of US fuel output

MOSCOW (MRC) - Crude oil slid and gasoline futures hit their highest since mid-2015 on Wednesday as flooding and damage from Tropical Storm Harvey shut over a fifth of US refineries, curbing demand for crude while raising the risk of fuel shortages, said Reuters.

Refineries with output of 4.1 MMbpd were offline on Tuesday, representing 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 U.S. 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 52 cents at USD51.48 a barrel by 1339 GMT. U.S. crude fell 42 cents to USD46.02.

In refined products, price movement was more dramatic and gains increased after sources on Wednesday said Total's Port Arthur, Texas, refinery had been shut by a power outage resulting from the storm.

US gasoline futures were up 6.4 percent at USD1.8966 a gallon, having hit $1.9022, the highest since July 2015. Diesel futures advanced by 1.8 percent to USD1.6960 a gallon, having touched their highest since January at USD1.7161.

"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 yr, resulting in the death of at least 17 people. In addition to shutting oil refineries, about 1.4 MMbpd of US crude production has been disrupted, equivalent to 15% of total output, Goldman Sachs said.

The impact of the storm overshadowed the latest weekly figures on U.S. supplies from the American Petroleum Institute (API) and a 360-Mbpd drop in Libya's output due to renewed unrest in the OPEC producer.

U.S. crude inventories fell by 5.78 MM barrels last week, the API industry group reported on Tuesday, suggesting a gradual tightening of the U.S. oil market. The figures, however, do not reflect the impact from Harvey.

Traders are awaiting the latest U.S. government inventory report, due at 1430 GMT from the Energy Information Administration, to compare with the API figures.
MRC

MOSCOW (MRC) -- Two explosions were reported on Thursday at the flood-hit Arkema SA (AKE.PA) plant in Crosby, Texas, and a sheriff’s deputy was taken to hospital after inhaling chemicals, the company said, as per Reuters.

The company said further explosions of organic peroxides stored on site were possible and urged people to stay away as the fire burns itself out.

Arkema said the company had no way to prevent fires because the plant is swamped by about 6 feet (1.83 m) of water due to flooding from Harvey, which came ashore in Texas last week as a powerful Category 4 hurricane, knocking out power to its cooling system.

The company said it was notified at about 2 a.m. by the Harris County Emergency Operations Center of two explosions and black smoke coming from the plant in Crosby.

"Organic peroxides are extremely flammable and, as agreed with public officials, the best course of action is to let the fire burn itself out," the company said.
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MOSCOW (MRC) -- Negotiations over September shipments of suspension polyvinyl chloride (SPVC) began in Russia between producers and converters last Friday. All producers announced a price increase of not less than Rb5,000/tonne from August, according to ICIS-MRC's Price report.

Back in July, most Russian producers had sufficient stocks of resin, but strong demand for PVC in August led to a major reduction. And in the second half of August, a shortage of PVC already began to be felt in the market because of lower shipments and scheduled and unscheduled outages at Russian plants. Therefore, Russian producers announced an increase of Rb5,000-6,000/tonne from August in September prices. Many converters were forced to accept such a price increase because of the absence of an alternative.

Sshutdowns for maintenance at Bashkir Soda Company and SayanskKhimPlast in July and August were scheduled. Therefore, some converters purchased more than enough PVC in August. But since16 August, Bashkir Soda Company has been forced to suspend production of resin for almost two weeks due to problems with ethylene shipments.

The plant's representatives said, RusVinyl also intends to reduce its capacity utilisation to conduct a short turnaround in September. Kaustik Volgograd will take off-stream its production for a three-week maintenance in the third decade of September.

May accounted for the peak SPVC imports, totalling 11,800 tonnes, after which imports began to decline gradually. Imports of resin were 4,600 tonnes for 20 days of August. Since July, Chinese producers, the key suppliers, have begun to dynamically increase their export prices of acetylene PVC because of the deficit in the domestic market, and Russian companies began to refuse to purchase resin in China.

Prices have started to rise dynamically in China since the second half of July due to internal problems, which led to a proportional increase in export prices for shipments to Russia. Since the middle of the month, PVC purchases of Russian companies have been virtually discontinued because of the disparity of prices in China and in the domestic market, and those quantities that entered the market in August were to cover for debts of local producers for June shipments.

Given export prices, announced by Chinese producers for September shipments, prices of acetylene resin, including the payment of all taxes and delivery to a consumer, will be, at least, at Rb74,000/tonne, which is higher than prices of Russian producers even amid the September price rise.

Some converters said they anticipated this situation and built up additional inventories. These stocks will last until October, and they intend to refrain from purchasing PVC in September. But in most cases, converters were forced to accept the current price increase.

Deals for September deliveries were done in the range of Rb69,000-72,000/tonne CPT Moscow, including VAT, for K=65/67 and for quantities up to 500 tonnes. Deals for K=70 resin started from Rb70,000/tonne CPT Moscow, including VAT, and higher.
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MOSCOW (MRC) -- South African firm Sasol has reported a drop in full-year headline earnings, blaming the strength of the domestic currency and low oil prices alongside company-specific problems including industrial action and a tax dispute, said Yourpetrochemicalnews.

The projected returns to be realised from the firm’s delayed flagship international project – a multi-billion-dollar US petrochemicals plant – were also reduced, and while shareholders were assured that the venture remained competitive, completion of a wider asset review was promised by the end of the year.

Headline earnings per share – the preferred profitability barometer for Johannesburg-listed firms – fell by 15% to 35.15 rand (USD2.7) on account primarily of the strengthening of the average rand/US dollar exchange rate over the course of the 12 months to 13.61 rand (USD1.04). This compares to 14.52 rand (USD1.11) in the year ending in June 2016.

Sasol’s costs are priced chiefly in local currency while its products are priced primarily in dollars. Total earnings per share – which increased by 54% to 33.36 rand (USD2.56) – were flattered by a one-off impairment during the previous financial year taken against a Canadian shale asset. The loss from that during 2016/17 was pared to 746 million rand (USD57.3 million).

Returns from the company’s mining division were down 21% to 3.7 billion rand (USD284 million) on account of a prolonged strike during the second half of 2016 at the company’s Secunda mine. Meanwhile, the ‘energy’ division – comprising liquid fuels assets – recorded a 20% decrease in operating profit to 11.2 billion rand (USD860 million) through a combination of lower refining margins, currency losses and an outage at the firm’s Natref refinery in Sasolburg.

A positive contribution was made by a 14% increase in the utilisation rate at the flagship Oryx GTL gas-to-liquids plant in Qatar. The more-troubled Escravos GTL facility in Nigeria was reported likewise to be being ramped back up to full capacity followed a maintenance shutdown.

Sasol also revealed some details of an ongoing tax dispute with the South African Revenue Service relating to an alleged underpayment of 1.2 billion rand (USD92 million) over the 2005-2014 period. A judgement in the authorities’ favour in late June forced Sasol to recognise a 1.2 billion rand (USD92 million) liability in the annual results but the firm emphasised the intention to appeal, having been granted leave to do so in mid-August.

In August last year, the company’s cost estimates soared by 24% to USD11 billion for the planned Lake Charles Chemicals Project (LCCP), which comprises an ethane cracker and derivatives units in Louisiana. The envisaged completion date was also pushed back by a year to late 2018.

The annual statement noted that construction was now proceeding according to the revised schedule and budget – with the facility 74% complete at the end of June and with USD7.5 billion having been spent.
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MOSCOW (MRC) -- Colonial Pipeline Co , the biggest US fuel system, said it would shut its main diesel and jet fuel line on Wednesday evening and its gasoline line on Thursday because of outages at its supply points from Tropical Storm Harvey and a lack of supply from refiners, reported Reuters.

The news sent U.S. gasoline prices surging to a two-year high of USD1.9350 a gallon, while margins jumped to a two-year high of USD24.38 a barrel, as Asia markets opened.

The pipeline connects the refineries of the Gulf Coast to the populous East Coast, transporting more than 3 MMbpd of fuel.

Colonial became the second major fuel pipeline operator with origins in the Gulf Coast to suspend operations because of the storm that brought devastating flooding to the region. The Explorer Pipeline, which has a capacity of 660,000 barrels a day, said on Wednesday it had shut its main fuel line from Houston to Tulsa, Oklahoma, as supplies dwindled.

At least two East Coast refineries have already run out of gasoline for immediate delivery as they scrambled to fill barges to markets typically supplied by the Gulf Coast, two refinery sources said. Others were seen operating at higher rates in order to boost profitability by meeting supply shortages.

"I've never seen a situation this bad," said one East Coast market source.

"Imports can't make up for this. This is going to be the worst thing the U.S. has seen in decades from an energy standpoint."

Kinder Morgan Inc's 700,000-bpd Plantation Pipeline system, which originates in Louisiana and ends in the Washington, D.C., area, remained fully operational, the company's spokeswoman, Melissa Ruiz, said in an email.

Colonial said earlier it expected outages at its Houston and Hebert area fuel supply points in Texas would likely continue through the weekend as a result of Harvey.

At least 4.4 million bpd of refining capacity were offline, or nearly 24 percent of total U.S. capacity, based on company reports and Reuters estimates. The Gulf is home to nearly half of U.S. refining capacity.

Colonial said of the 26 refineries that connect to the Colonial system, 13 were located between Houston and Lake Charles, Louisiana, an area affected by the storm.

"Once Colonial is able to ensure that its facilities are safe to operate and refiners in Lake Charles and points east have the ability to move product to Colonial, our system will resume operations," it said in a statement.

As MRC informed previously, oil markets were roiled on Monday after Tropical Storm Harvey wreaked havoc along the US Gulf Coast over the weekend, crippling Houston and its port, and knocking out several refineries as well as some crude production. US gasoline prices hit two-year highs as massive floods caused by the storm forced refineries in the area to close. In turn, U.S. crude futures fell as the refinery shutdowns could reduce demand for American crude. Brent futures steadied as pipeline blockades in Libya slashed the OPEC state's output by nearly 400 Mbpd.
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