Oil falls amid United States refining outages

Returns from making oil products in Asia have soared to the highest level in more than one and a half years. Even companies that aren’t transporting fuel west are benefiting according to Indian Oil Corp

Tropical Storm Harvey's effect on the energy industry spread worldwide as flooded USA refiners and closed fuel pipelines threatened to squeeze national supply, roiling global fuel markets and rerouting millions of barrels of fuel to the Americas to avert shortages.

As many as 11 ports were shut as Harvey hit the Texas coast, leaving 28 tankers laden with more than 18 million barrels of overseas oil drifting offshore as of Wednesday night. It hit a high of 9.6 MMbpd (million barrels per day) in June 2015.

Others were seen running at higher rates to boost profitability by filling shortages.

"This is not surprising as about 20 percent of the United States refining capacity has been knocked out by Harvey", he said.

In addition to shutting oil refineries, about 1.4 million bpd of USA crude production has been disrupted, equivalent to 15 percent of total output, Goldman Sachs said.

Perry said he's authorized immediate shipments of crude to the Phillips 66 refinery in Lake Charles, Louisiana.

That has pushed US crude prices below prices for crude elsewhere, making it cheap for global refiners if they can still get a cargo out. Mexico, Brazil, Colombia and other countries were also seeking to tap some of the 7 million barrels of fuel sitting in the Caribbean sea.

"Everything is fine until you get a surge in demand", said Alan Gelder, vice president of refining and oil at Wood Mackenzie, adding that "the fear of shortages. can actually create shortages".

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Since Friday, they're up 10 cents, to a nationwide average of $2.45 a gallon - the highest they've been all year. It is also home of the Louisiana Offshore Oil Port (LOOP), the largest privately owned USA crude storage terminal.

Refineries with output of at least 4.4 million barrels per day (bpd) were offline on Tuesday, representing almost 24 percent of US production, according to Reuters estimates and company reports.

About a third of the nation's refining capacity is offline on the Gulf Coast. That's expected to squeeze supplies of gasoline, diesel and jet fuel that runs through the 5,500-mile pipeline. But supplies from distant markets may not arrive soon enough to avert a crunch.

This came on the back of record US gasoline demand of 9.846 million bpd last week, and as USA refining utilization rates rose to 96.6 percent, the highest percentage since August of 2015. If Texas refineries are down for an extended period of time, the national average could climb above $2.50 a gallon, the highest price since August 28, 2015. That would have been a 14 percent increase, taking US output to a level not seen since the 1970s.

Evidence is also emerging of the supply disruption hitting retail prices for gasoline stateside.

Meanwhile, a billion barrels of oil will be released from a government stockpile and the secretary of the Department of Transportation will expedite fuel deliveries to Texas from 25 surrounding states.

"It's not a significant problem at the present time, but it could turn into one", said William Fleischli, executive vice-president of the Illinois Petroleum Marketers Association, which represents 400 fuel distributors.

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