U.S. gasoline futures surged in Asian trading on Monday, as now-Tropical Storm Harvey knocked out almost 15% of the nation's refinery capacity with further disruptions likely to come.
September Nymex futures were last up 5.8% at $1.7645 per gallon, while the more active October contract rose 4.2% to $1.6057 a gallon.
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Further supply disruptions are expected, including Exxon's (XOM) Houston-area refinery -- the nation's second biggest -- processing as much as 560,000 barrels of oil a day and feeding fuel into pipelines and barges that move it across the southeastern U.S. and up the East Coast.
Harvey's projected path also includes an even bigger refinery in Port Arthur, Texas, which is owned by Saudi Arabian Oil Co. and produces 600,000 barrels of fuel a day. Energy companies are still assessing the damage from Harvey.
"It will probably be a couple of days before we get clarity on the duration of closures," says Ric Spooner, chief markets strategist at CMC Markets, adding that prices are likely to remain volatile in the near term as investors are likely to focus on the storm damage.
It can take weeks or even months to get new electrical equipment and other parts installed to repair damage from flooding. Harvey's path cuts right through the heart of the U.S. oil infrastructure, with the Texas coast being home to nearly 30% of the country's refining capacity.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October were down 0.3% at $47.71 a barrel in the Globex electronic session. October Brent crude on London's ICE Futures exchange rose 0.4% to $52.62 a barrel.
The dip in Nymex crude futures reflect concerns about demand in the region following the weather-related shutdowns of refineries, said Stuart Ive of OM Financial, though Brent prices were higher as overall global demand was solid.
Investors will also have their eyes on U.S. stockpiles data this week, which could potentially cushion some of the impact on reduced supplies caused by Harvey. U.S. refiners produced record amounts of fuel during the summer.
Analysts noted that Harvey also shut down several big offshore oil and gas platforms in the Gulf of Mexico. The platforms account for roughly 22% of offshore oil production capacity in the Gulf.
Crude oil prices could also get a lift amid speculation that members of the Organization of the Petroleum Exporting Countries could extend their production cap beyond March next year, according to Gnanasekar Thiagarajan, director of Commtrendz Risk Management.
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(END) Dow Jones Newswires
August 28, 2017 00:56 ET (04:56 GMT)