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United States gasoline in first slide since Harvey, oil under pressure

03 September 2017

The jump came after the Colonial Pipeline, the biggest US fuel system, said it would shut its main lines to the Northeast by Thursday, hit by outages at pumping points and lack of supplies from refiners.

Oil traders were scrambling Tuesday to move crude and fuel supplies through ports in Louisiana as Tropical Storm Harvey barreled toward the state, threatening to close the last major oil terminals still operating on the U.S. Gulf Coast.

"The government is actually reacting positively trying to address and do what they can", John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone.

Over 2 million barrels per day (bpd) of refining capacity were estimated to be offline as a result of the storm.

Benchmark U.S. gasoline futures surged more than 15 percent after Harvey hit.

About 4.4 million barrels of USA refining capacity have been shut by Harvey, including the country's largest refiner, Motiva Port Arthur, which can process more than 600,000 barrels a day.

-The heart of the United States energy industry suffered further damage overnight from Tropical Storm Harvey, and supply constraints could last for weeks with almost one-quarter of USA fuel output knocked out. Texas and Louisiana are home to 45 percent of total US refining capacity.

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The U.S. average for a regular gallon of gasoline rose to $2.519 as of Friday morning, the highest since August 2015 and a 17.5 cent increase since Aug. 23, before the storm began, according to motorists advocacy group AAA.

The shutdowns also led the US government to tap its strategic oil reserves for the first time in five years on Thursday, releasing 500,000 barrels of crude to a working refinery in Louisiana.

Companies also face problems with pressure imbalance and high natural gas levels at new shale oil wells in the Permian Basin, the largest USA oilfield.

Dave Luchtman, owner and president of Lucky's Energy Service Inc, a small distributor in Chicago, has rented two storage trailers that hold 8,000 gallons each, expected to be delivered Friday.

"I can't imagine we will get much visibility for at least a week". DeHaan said only one rack, or wholesale gasoline terminal, out of the six in the Dallas area was dry. They are also checking with the state Attorney General's office to see how law enforcement can deal with any suspected gouging.

"At this point, we're really waiting to see what the cumulative effect will be" from Harvey, said Paul Hesse of the U.S. Energy Information Administration.

Crude prices, by contrast, fell as the closure of so many US refineries led to a slump in demand for the most important feedstock for the petroleum industry. The Colonial Pipeline, which stretches from Houston to New Jersey, was partial closed. But supplies from distant markets may not arrive soon enough to avert a crunch. The market is "way under-appreciating the magnitude of this". That's expected to squeeze supplies of gasoline, diesel and jet fuel that runs through the 5,500-mile pipeline. "This summer, eclipse travel injected an extra burst of demand for Idaho fuel that has carried over into Labor Day weekend".

United States gasoline in first slide since Harvey, oil under pressure