How would Harvey impact global oil prices, OPEC? (Exclusive)

How would Harvey impact global oil prices, OPEC? (Exclusive)

Baku, Azerbaijan, Sep. 3

By Farhad Daneshvar – Trend:

Suzanne Minter of S&P Global Platts has turned down the significance of speculations suggesting that the Hurricane Harvey may lead to an increase in global crude pricing.

"A temporary reduction of US refining capacity due to the Hurricane Harvey does not imply a shortage of global energy," Suzanne Minter of S&P Global Platts told Trend.

"While I do not see any reason that reduced US refinery runs would incite OPEC to change its output, I do think that global barrels, currently entering the US, may redirect themselves to any other spare global refining capacity, be it in the Europe, the Middle East or Asia, so that those regions can create refined product to fulfill the potential shortfall of the US refined product to the globe. Therefore, there may be some slight uplift to global refined product pricing as barrels need to potentially ship themselves to more distant markets, but the amount of crude supply that creates refined barrels, has not been impacted by Harvey – therefore, this should not cause an increase in global crude pricing," said Suzanne Minter, director of client strategy and energy solutions at S&P Global Platts, a New York-based provider of information and benchmark prices for the commodities and energy markets.

On Friday, September 1, West Texas Intermediate (WTI) closed at a $47.29, a $5.46 discount to Brent in NW Europe, a $3.06 discount to the Dubai barrel in Singapore and $2.12 discount to the OPEC basket.

The key component of the opening of the spreads was not so much a price increase of the global barrel, but a softening of the WTI barrels. WTI softened with the landfall of Hurricane Harvey as the markets perceived US domestic barrels as "trapped" due to decreased refinery runs. In reality though, the physical driver between the WTI and global barrel spread may be the closing of the US ports.

Per the EIA, US Gulf Coast ports have averaged year to date imports of 4.0 MMB/d (million barrels per day) of crude and crude products.

In June, Gulf coast refiners imported 3.2 MMB/d of crude and 750,000 B/d of refined product – primarily finished gasoline.

Ports closed on Thursday August 24, effectively leaving 3.9 MMB/d of global crude and product looking for a new home. Of this displacement, it seems more than likely that the WTI spread widening was more of a "knee Jerk" reaction than a true physical necessity.

It seems more logical that global barrels should now begin to soften relative to WTI as the trading and producing communities grasp the fundamental reality that approximately 44 million global barrels may now be looking for a new home.

US ports closed on Thursday August 24 and while there are some partial reopening, full resumption of port activity is not expected until Tuesday.

While there has been partial restart of some refining capacity, as of Saturday, September 2, S&P Global Platts estimates that there is still between 2.3 and 3.2 MB/d of US refining capacity offline.

As waters recede across the US Gulf Coast region, refiners will assess any damage and determine when they can bring refineries back up to full runs.

As the ports reopen, the US refiners that are running should be able to source barrels of varying grades from global supply that they need to create the refined products required by US domestic markets.

Within the US , there may be some logistical disconnects as the US gulf coast supplies 60 percent of the Supply for the US Atlantic coast via Colonial pipeline, but if refining capacity in the US Gulf remains curtailed, it would seem that the US Atlantic coast may simply be forced to import more finished product from European refiners.

"Where it gets more interesting is when one considers that the US is a net exporter of 2.7 MMB/d of refined product – primarily to central and South America, through the US Gulf Coast. The longer the US refiners are unable to produce adequate product for export, the tighter the markets will get for central and South America, who will be looking for supply from other global refiners. It is key to realize that a temporary reduction of US refining capacity does not imply a shortage of global energy"

"Therefore, it seems that if, the US refiners are not able to bring refinery utilization back up to pre-Harvey levels relatively soon, there could be a significant shift in trade flows. OPEC members Saudi, Venezuela and Iraq are among the largest suppliers of imported barrels for the US refiners"

In June the 3 combined supplied 40 percent or 1.6 MMB of the 3.9 MMB/d imported into the Gulf Coast.

"While I do not see any reason that reduced US refinery runs would incite OPEC to change its output, I do think that global barrels, currently entering the US, may redirect themselves to any other spare global refining capacity, be it in Europe, the Middle East or Asia, so that those regions can create refined product to fulfill the potential shortfall of US refined product to the globe. Therefore, there may be some slight uplift to global refined product pricing as barrels need to potentially ship themselves to more distant markets, but the amount of crude supply that creates refined barrels, has not been impacted by Harvey – therefore, this should not cause an increase in global crude pricing"

The boom in US energy production since 2012 coupled with the upgrading of the US and global refineries and build out of export capacity has enabled the US to alter the historic flow patterns and energy distribution.

"While Hurricane Harvey may temporarily alter these new patterns, it seems that US upstream production has not been significantly affected and that once the refineries, crackers and terminal infrastructure can all turn itself back on in conjunction with one another in the US, the US will retain its position of the world’s top supplier of petroleum and natural gas hydrocarbons."

Operator of Kazakh Kashagan to hold open round-table on Marine Access Channels Project
Operator of Kazakh Kashagan to hold open round-table on Marine Access Channels Project
New oil drilling platform activated in Turkmen sector of Caspian Sea
New oil drilling platform activated in Turkmen sector of Caspian Sea
Iran's Energy Exchange announces products to be on sale on April 13
Iran's Energy Exchange announces products to be on sale on April 13
Loading Bars
Latest
Turkey registers more than 54 560 new coronavirus cases
Yuri Gagarin image lights up Dubai’s Burj Khalifa
Korean battery makers rally after battery dispute settlement
Inventory of basic goods in Iran's ports increase
Eni Turkmenistan Ltd opens tender for provision of directional drilling services
Azerbaijan's Nakhchivan records industrial production value growth in 1Q2021
Azerbaijan's housing agency talks further plans on building residential complexes
Georgia not to cut economic growth forecast - Minister of Economy
Russia restricts air service with Turkey from April 15 to June 1
Iran, Afghanistan discuss bilateral ties, latest developments
Georgia faces third coronavirus wave - NCDC
Turkey welcomes Ramadan with tight measures against COVID-19
Operator of Kazakh Kashagan to hold open round-table on Marine Access Channels Project
Nvidia to directly challenge Intel with Arm-based 'Grace' server chip
New oil drilling platform activated in Turkmen sector of Caspian Sea
War Trophy Park to open for visitors in Azerbaijan’s Baku soon
Azerbaijani, Maldives FMs hold exchange views issues mutual interest
Uzbekistan discloses progress on construction of new plant of Navoiazot company
Azerbaijani FM receives delegation of Italian Senate (PHOTO)
Azerbaijan’s Baku Metro introduces solution for automatic supply of voltage to trains (PHOTO)
Several audit companies in Azerbaijan included in network of int’l organizations
Current interest rate in Azerbaijan to improve position of local capital market - Unicapital
International IT Holding of Belarus implementing big transport project in Azerbaijan
Russia's Red Wings may launch flights from Yekaterinburg, Chelyabinsk to Uzbekistan
Iran's Energy Exchange announces products to be on sale on April 13
Bahar Azadi gold coin price rebounds in Iran
Uzbekistan increases export volume of clothing to Kazakhstan
Iran's Natanz nuclear facility continues to operate – AEOI
UAE reports 1,928 new COVID-19 cases, two deaths
Russia allows import of tomatoes to several Azerbaijani enterprises
Israel's fiscal deficit narrows as economy begins recovery
IMF makes prediction regarding Georgian external debt
UK, EU talks on Northern Ireland are constructive, differences remain
Georgian E-Space actively cooperating with car dealers to bring new electric vehicles
Russia, Uzbekistan approve text of space co-op agreement
Uzbekistan joins CIS industrial agreement
Uzbekistan, Kuwait launching direct flights
Georgia's external debt up due to COVID-19 shock - IMF
Azerbaijan's CBA signs contract to acquire licenses for cybersecurity
Uzbekistan’s centers of public services improve work on basis of Azerbaijan's ASAN
Iran's LPG exports decreases
USDA unveils forecast for Azerbaijan's barley production
Russian Technonikol looks to build thermal insulation plants in Kazakh Almaty region
Indian-American, 5, Reads 36 Books Nonstop In 105 Minutes, Sets Record
Weekly review of Georgian's capital markets
Georgian Inert Materials Complex company investing in extraction of gravel materials
Nar’s renovates its service centers in Baku and regions (PHOTO)
India becomes largest buyer of US crude in first quarter of 2021
Turkmenistan's Mary region opens tender for construction of schools
Iran implements its plan on domestic production in full - deputy minister
Azerbaijan publishes latest data on COVID-vaccinated citizens
Investments in Kazakhstan's agriculture surge
Several international companies express interest in Georgian FDI Grant
Minister discloses amount of export of Azerbaijan’s non-oil products
Iran tightens restrictions for travelers on borders with Turkey, Iraq
Azerbaijan confirms 1,151 more COVID-19 cases, 1,052 recoveries
Georgia to place new Eurobonds
Iran looks to set up advanced centrifuges at Natanz nuclear plant
Kazakhstan increases exports to UK
Iran Oil Ministry to fund startups
Iran unveils generation capacity of thermal power plants
Azerbaijan temporarily bans import of poultry meat from several countries
Georgia shares data on revenues from tobacco excise duty
S.Korean PM, Iranian Supreme Leader's Advisor discuss frozen Iranian funds
Kazakhstan, Belarus trade surges
Potato, onion planting completed in Dashoguz region of Turkmenistan
Iran's TEDPIX sees decline
Swiss government urges voters to back COVID-19 law that foes want to ditch
Kazakhstan exceeds plan on petroleum products output
High-voltage substation with digital control system to be built in Uzbek Jizzakh region
Azerbaijani president signs order to set up new enterprises in Balakhani Industrial Park
Revenues of Azerbaijan's Nakhchivan from communication services increase
Turkish Aksa Enerji building thermal power plants in Uzbek Tashkent region
Maersk Explorer completes drilling activities for Shah Deniz
Unicorns of 2021: Gupshup, ShareChat latest entrant to $1B club; total number rises to 10
In a first, surgery restores 'right' music to man's ear
Cargo transportation in Azerbaijan's Nakhchivan increases
Georgia reveals volume of pension fund's assets
Volume of SOCAR Ukraine’s aviation fuel supplies revealed
Baku Heydar Aliyev Airport gains 5-Star COVID-19 Airport Safety Rating
U.S., European consumers warm up to electric vehicles, but remain wary of price
Kazakhstan’s KAZAKHALTYN delists its shares from Stock Exchange
Azerbaijan's Nakhchivan sees increase in investments in fixed assets
Several contracts signed in Iran’s oil sector
Azerbaijan announces restoration of Araz newspaper's office building in liberated Fuzuli (PHOTO)
Domino's, Nuro to start robot pizza delivery in Houston
Turkmenabat cotton spinning factory of Turkmenistan exports most of its products
GDP of Azerbaijan’s Nakhchivan shows increase
Turkmenistan’s Foreign Economic Affairs bank talks volume of net profit for 2020
Average monthly nominal salary in Azerbaijan's Nakhchivan continues to grow
Kazakhstan Railways opens tender for rolling stock repair
Turkish Ziraat Bank shares forecast for Azerbaijan's GDP in 2021-22
Kazakhstan's gas consumption exceeds plan in 1Q2021
Kazakhstan’s Ulba Metallurgical Plant announces tender for equipment repairs
Iran has greater potential in technology than in oil sector - minister
Azerbaijan discloses daily volume of oil production for March 2021
Assets of Kazakhstan’s National Fund decrease
Iran's CBI allows some traders to import commodities, instead of revenues
Iranian technology companies produce number of aviation products
OECD countries’ crude oil imports fell in 2020
All news