Houston, we have a problem

Barge collides in Houston ship channel

Russia and China Dominate Oil!

Worries that China and Russia may be slipping into recession are capping the moves in oil. Weak Chinese manufacturing that is raising speculation that more stimuli are on the way. HSBC's preliminary Purchasing Managers' Index, released Monday, hit an eight-month low at 48.1 in March. A reading above 50 indicates expansion from the previous month. Yet oil struggles as the G7 minus Russia decides what new sanctions they can afford to put on Russia. Russia is amassing troops on the Ukraine border and there are fears that Putin is not done with his annexing.

Brent crude is under pressure and WTI will be supported by a shutdown of the Houston Shipping channel, which is disrupting supply. Traders are playing the ranges in the market as it is hard to get a definitive direction. Palladium is soaring on fears Russian sanctions will cut into supply and gas prices are on the rise.

Bloomberg News reported that the Houston Ship Channel remains closed as the U.S. Coast Guard and Galveston County Emergency Management work to contain and clean up a 4,000-barrel fuel oil spill following a collision yesterday. A barge containing about 22,000 barrels (924,000 gallons) of ship fuel partially sunk near Texas City, Texas, Cam Olivieri, a spokesman for the Galveston County agency, said in a telephone interview today. The barge, which was being towed by the vessel Miss Susan to Bolivar, was struck by the 585-foot bulk carrier Summer Wind, according to the Coast Guard. The 52-mile (84-kilometer) shipping lane is a key transit route for processed fuels and chemical feedstock from refineries along the Gulf Coast.

A U.S. shale oil and natural gas boom has contributed to traffic in the channel, which was restricted today, the Coast Guard said.  Response groups coordinated by the Coast Guard and Texas authorities were working to salvage the partially submerged barge, Lieutenant Sam Danus, a Coast Guard spokesman, said by phone from the incident command post at Texas City today. Oil- recovery vessels worked overnight to contain and remove the marine fuel. Overcast conditions and rain forecast throughout the day were “not ideal” for the clean-up effort and “visibility is not the greatest,” Danus said. Summer Wind collided with the barge at 12:35 p.m. local time yesterday, according to Coast Guard statements on its website. The most severely damaged part of the barge contained a tank with a capacity for 4,000 barrels, or 168,000 gallons, of fuel, Danus said.

Four skimming vessels cleaned ship fuel from the water overnight, aided by containment booms stretching for about 600 feet and placed to stop slicks from spreading, the Coast Guard said. Twenty more craft joined the effort at sunrise, which was about 7 a.m. local time, Danus said. 

The USA Today reports that Gasoline prices have risen steadily the past six weeks through March 18. There was an uptick in gas prices all but one of the past 38 days, and gas is now more expensive than at any point the past six months. In a number of states, the price of gas is now more than $3.75 per gallon, vs. $3.52 nationwide, with gas prices in several other states not far behind. In Hawaii, the price of gas is $4.17 per gallon. There, as in a number of other states, the high price of gas reflects the difficulties involved in transporting oil and refined products to the state.

In an interview with 24/7 Wall St., Michael Green, public relations manager at AAA, said that seasonal factors played a major role in the recent run-up in gas prices. "Refinery maintenance, the switchover to summer blend gasoline, and more-recently rising demand," have all played a role in the rise of gas prices, Green said. Differences in regional gas prices are in part the result of where a state is located. "The closer you are to a refinery, generally means you'll pay less at the pump," Green explained. Hawaii may be the most notable example of this. Similarly, states in the Northeast often pay higher prices due to their distance from oil-producing and refining states.


About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor.