The Energy Information Administration (EIA) reported quite clearly the impact that Hurricane Harvey and Irma had on gasoline supply. They reported the biggest gasoline drawdown in history, 8.428 million barrels, putting gasoline supply back to a three year low. Yet at the same, it showed what the U.S. refining community is going to have to do and it basically means that they will demand more crude oil as they look to rebuild supply.
While Florida and the rest of the Gulf Coast deal with the aftermath of Hurricane Harvey and Irma and the energy markets assess the short-term demand destruction, in the bigger picture for energy, we are getting very bullish data in supply versus demand.
Oil prices and petroleum products are starting to deal with the recovery phase in Florida and Texas and the rest of the Gulf Coast. Gas prices at the pump are showing signs of stabilizing as refiners come back on line and fears of demand destruction as places in Florida and in Texas are cutting into local demand.
Almost all global markets seem to be transfixed on Hurricane Irma, which could wallop Florida with an unprecedented and merciless blow and have an impact on many lives as well in the U.S. and global economy. Fox News reported that France’s interior minister on Thursday said the Category 5 storm killed at least eight and injured 23 on St. Martin. Irma blacked out much of Puerto Rico and is headed toward Haiti and the Dominican Republic.
Crude oil prices are still reacting to the post Hurricane Harvey recovery efforts. Crude prices surged as refiners start to come back online and nervous buyers in Asia start to buy up oil supply. Reuters reported that the spread between Brent and WTI is causing some big Asian buying as refinery shutdowns in the aftermath of Harvey pushed the spread between West Texas Intermediate crude and Brent crude to the widest in two years at nearly $6 a barrel.
The U.S. refineries are coming back and believe it or not, so is oil production and gas production. Last week Valero Energy restarted two Galveston refineries and are now back to normal production rates. Yet, just as the industry starts to recover, more storms are going to create havoc.