By Alex Longley and Ann Koh
Refinery closures from companies including Motiva Enterprises LLC and Valero Energy Corp. could shut in more than 1 million barrels a day of processing capacity before the storm threat passes. U.S. gasoline futures rose to the highest since before the pandemic on concern over possible shortages.
The predicted hurricane could have ramifications for global energy flows — diverting gasoline from Europe to the U.S. for example — and has translated into higher premiums for crudes from the affected region. The impacts are likely to be fleeting, however, with the coronavirus and the pace of global oil production restarts remaining the key price drivers for the foreseeable future.
“Gasoline has moved higher in response to more than 1 million barrels a day potentially being shut in,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Further upside may be tricky to achieve. Crude oil is still looking for a pulse having traded within a $1 range yesterday.”
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As the storms menace fuel supplies in the Gulf Coast, the structure of the U.S. gasoline market has changed. Nymex gasoline futures for September are trading at their biggest premium to those for October since March, a sign that traders expect supplies to be scarcer than previously thought.
There are also signs that crudes outside of the U.S. are rallying in sympathy with American grades, amid the potential for disruption to U.S. crude exports. Key contracts known as swaps in the North Sea market, which prices much of the world’s crude, rallied to their strongest level since mid-July on Tuesday, according to brokerage Eagle Commodities Ltd.
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