Hurricane Harvey Likely to Reduce U.S. Refinery Output: Baird

Hurricane Harvey, which is expected to make landfall around one o’clock in the morning on Saturday, August 26, may have an impact on the near-term energy outlook for the U.S.
As of now, Harvey is classified as a Category-2 storm and is expected to be re-characterized to a Category-3 storm around the time it makes landfall. The last Category-3 hurricane to make landfall in the U.S. was hurricane Wilma in 2005, which hit South Florida.
Oil & gas infrastructure, refining capacity in the path
Baird Equity Research — in a report out today — anticipated that Harvey would potentially damage important energy infrastructure in the Gulf Coast region. Any damage to energy infrastructure could impede hydrocarbon liquid and gas flows for days or weeks.
Nearly half of the United States’ refining and processing capability is located along the Gulf Coast.
Baird’s report says that rain may be the largest threat to refining infrastructure — more so than winds or storm surge. Storm surge itself — which could rise up to 12 feet — is expected to be restricted to the corridor stretching from Port Mansfield to Sargent — the area most directly in the path of storm. Flooding is predicted to be severe and dangerous in the path of Hurricane Harvey.
Rainfall is expected to reach 15 inches, with some reports predicting up to 30 inches.
Remembering Hurricane Rita
In the past, Hurricane Rita, which was also a Category-3 storm, lowered total U.S. refinery utilization by 16.9%, down to 69.8% in 2005. The refineries then required several weeks to bring throughput up to pre-storm levels.
Baird’s report asserts that oil prices will weaken, and that fuel prices will rise. Production is not expected to be impacted too heavily, with 17% of the U.S.’s crude production and 5% of its gas production located in the Gulf of Mexico. Production could be reduced in the Eagle Ford and other plays by power loss and inland flooding.
Originally published at Oil & Gas 360.
