Hurricane Harvey Strengthens as Refinery Risk Lifts Gasoline
(Bloomberg) -- Hurricane Harvey strengthened on its path toward the Texas coast, forecast to become the worst storm to strike the region in more than a decade. The price of gasoline rallied as it threatened to wreak havoc on the heart of America’s energy sector.
Harvey became a Category 2 hurricane around midnight in Texas and currently has top winds of 105 miles (165 kilometers) an hour, the National Hurricane Center said in an advisory posted around 4 a.m. local time Friday.
Oil refiners in the Gulf Coast, home to as much as half of the nation’s refining capacity, began halting operations amid warnings of deadly floods and storm surges. If Harvey makes the forecast landfall as a Category 3 -- with winds of at least 111 miles an hour -- it’ll be the strongest storm to hit the U.S. since Wilma in 2005.
“We are expecting catastrophic, life-threatening flooding in Southeastern Texas,” said Carl Erickson, a senior meteorologist for AccuWeather. “The weather goes downhill as the day goes on Friday.”
Harvey has drifted from the southern Gulf of Mexico, regaining strength after passing over Mexico’s Yucatan Peninsula earlier this week. While its course has meant the storm isn’t shutting much oil and natural gas production in the Gulf, it’s set to hit a cluster of refineries that process almost 5 million barrels of oil a day.
About 1 million barrels a day of crude and condensate refining capacity in Texas has been shut down by companies including Valero Energy Corp., according to company statements, government releases and people familiar with the situation. About 10 percent of Gulf of Mexico oil production has also been shuttered.
Gasoline futures in New York surged to the highest in four months in intraday trade, rising by as much as 4.6 percent to $1.7406 a gallon, and were at $1.7089 at 11:44 a.m. London time. Oil pared a fourth weekly loss and traded at $47.73 a barrel in New York.
Flooding will probably close roads and inundate plants, while strong winds may disrupt on utilities’ systems and knock out power to hundreds of thousands of homes and businesses. Flooding poses a “very serious risk,” said Kyle Cooper, director of research with IAF Advisors in Houston.
The Port of Corpus Christi closed for all vessels sailing in or out as part of its hurricane preparations, officials said in an emailed statement. The U.S. Coast Guard shut Houston-Galveston ports to inbound vessels, and energy companies are shutting fuel terminals.
“It is definitely going to be an issue for the ship channels,” said Shunondo Basu, a meteorologist and natural gas analyst at Bloomberg New Energy Finance.
Texas Governor Greg Abbott declared a state of disaster for 30 counties and evacuations have begun. A hurricane warning has been issued from Port Mansfield to Sargent, Texas. A storm surge of up to 12 feet (3.7 meters) may occur near the Padre Island National Seashore to Sargent. Storm surges account for close to half of all hurricane deaths.
The latest forecast for southeast Texas is tropical storm force winds of about 50 mph, according to a local update issued by the National Weather Service in Houston at 4:30 a.m. local time.
Hurricane warnings have been issued for De Witt and Karnes in south-central Texas, according to a local advisory by the National Weather Service in Austin at 4:30 a.m. local time. Life-threatening rainfall and flash flooding appear imminent for much of the area, specifically from San Antonio and areas south and east.
Harvey may dump as much as 35 inches of rain on areas of Texas over the next week. The Federal Emergency Management Agency is sending staff and food and water supplies to the region.
How to Track Harvey’s Path Through Texas and Its Refineries
Hurricane Ike, a Category 2 storm when it struck near the mouth of the Houston Ship Channel in 2008, killed 103 people across the Caribbean and the U.S., including at least 21 in Texas, Louisiana and Arkansas. It caused about $29.5 billion in damage, according to a 2009 National Hurricane Center report. Property analytics firm CoreLogic estimated Thursday that 232,721 homes along the Texas coast with a reconstruction cost value of about $39.6 billion were at risk of storm surge damage.
Other businesses and markets affected:
- Anadarko Petroleum Corp., Exxon Mobil Corp., Royal Dutch Shell Plc are among the energy explorers that have shut platforms in the Gulf of Mexico; ConocoPhillips and EOG Resources Inc. are among those that have halted drilling in Texas.
- Kinder Morgan Inc. declared force majeure at natural gas compressor stations; DCP Midstream LP shut gas capacity in south-central Texas; and Enbridge Inc. evacuated non-essential workers from some platforms.
- Soybean futures climbed Thursday as crops in Louisiana and Mississippi may be damaged; grain elevators including Corpus Christi Grain Co. suspended shipments; prices were little changed Friday.
- Rain could damage almost 200,000 cotton bales in region, said Chris Yaklin, general manager of Gulf Coast Cooperative.
- BNSF was halting traffic from Galveston Island late Thursday and holding Galveston-bound trains until further notice.
- Policyholder-owned State Farm Mutual Automobile Insurance Co. has the largest share in the market for home coverage in Texas, followed by Allstate Corp., Farmers Insurance and United Services Automobile Association, according to data compiled by A.M. Best Co.