A hurricane in the heart of the U.S. energy industry is set to curtail near-record U.S. oil production for several weeks, with the impact expected to reverberate throughout the country and across international energy markets.
Harvey hit the Texas shore as a fierce Category 4 hurricane, causing massive flooding that has knocked out 11 percent of U.S. refining capacity, a quarter of oil production from the U.S. Gulf of Mexico, and closed ports all along the Texas coast.
Gasoline futures jumped as much as 7 percent to their highest level in more than two years in early Monday trading in Asia as traders took stock of the storm’s impact.
The outages will limit the availability of U.S. crude, gasoline and other refined products for global consumers and further push up prices, analysts said.
Damage assessments could take days to weeks to complete, and the storm continues to drop unprecedented levels of rain as it lingers west of Houston, home to oil, gas, pipeline and chemical plants. And restarts are dangerous periods, as fires and explosions can occur.
So far, the federal government has not announced if it will release barrels of oil or refined products from the nation’s Strategic Petroleum Reserve (SPR), which holds nearly 680 million barrels of oil.
The SPR was established in the 1970s to prevent supply shocks in the wake of an embargo imposed by several members of the Organization of the Petroleum Exporting Countries (OPEC).