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Hurricane Maria punishes US refineries without touching land

LiveMint logoLiveMint 26-09-2017 Barbara Powell

Houston: Hurricanes sometimes don’t need to make landfall to cause problems for US refineries.

At least two East Coast refineries are making less gasoline and diesel as rough Atlantic seas hamper the transfer of crude oil from ships to barges for delivery to the facilities, people familiar with operations say.

Philadelphia Energy Solutions Inc., which operates the largest oil-refining complex serving the New York Harbor market, was said to cut rates about 20%. Delta Air Lines Inc.’s Monroe Trainer in Pennsylvania, which was processing 30% less crude as of 23 September, may have to resort to using feedstock like vacuum gasoil in its main processing units because it’s running out of crude, the people said.

“Product prices are rallying in response to refinery run cuts on the East Coast, which will result in lower product availability in the short term,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said in a phone interview Monday.

Gasoil use

Using feedstocks like gasoil instead of crude would further limit the amount of fuel a refinery can produce and deplete East Coast inventories that were already run down after Hurricanes Harvey and Irma. Gasoline and diesel futures surged Monday, with diesel reaching a two-year high and gasoline touching levels last seen right after Harvey shut almost a quarter of US refining capacity.

Philadelphia Energy also ordered as many as eight train loads of Bakken crude from North Dakota to supplement crude quickly at its 335,000 barrel-a-day refinery. Crude from the Midwest is looking more attractive to coastal refiners as US benchmark West Texas Intermediate crude sank to the steepest discount since 2015 to Brent, the international marker. The Trainer refinery was forced to cut rates after running above its 185,000 barrel-a-day nameplate capacity last week.

Adam Gattuso, a Trainer spokesman, couldn’t comment on daily operations, he said in an email Monday. Philadelphia Energy doesn’t comment on day-to-day operations or its commercial activities, Cherice Corley, a spokeswoman, said in an email.

Gasoline for October delivery on the New York Mercantile Exchange rose 3.2% Monday, while diesel futures jumped 2.2%. In the New York Harbor spot market, gasoline strengthened by 1.37 cents a gallon versus futures, according to Bloomberg data.

A small-craft advisory for hazardous seas stretches from Massachusetts to the North Carolina-Virginia border, where it is replaced by tropical storm warnings, the National Weather Service said. At the mouth of Delaware Bay, waves were forecast to build Monday and Tuesday, peaking at about 10 feet on 27 September as Hurricane Maria moves north.

The storm, which devastated Puerto Rico last week, is forecast to graze the North Carolina coast before turning east in the Atlantic. It will create rough seas along the East Coast as it passes. A wave of 3.6 feet was reported at 6pm local time Monday at the mouth of Delaware Bay, according to the National Data Buoy Center’s website. Over the weekend, waves at the buoy, about 30 miles from Cape May, New Jersey, had reached 5.2 feet.

Texas refineries, including Exxon Mobil Corp.’s Beaumont and Total SA’s Port Arthur are still trying to restore normal operations after Harvey’s 25 August landfall.

“Contributing to the price rally is the fact that Texas Gulf Coast refineries haven’t fully restored operations since Hurricane Harvey,” Lipow said. Bloomberg

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