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Gasoline up as Texas plants brace for second Harvey hit

Pipelines, terminal operations suspended because of U.S. storm. About 2.35 million barrels of capacity shut after flooding.

By Ben Sharples and Perry Williams

Petroleumworld 08 29

Gasoline extended gains for a sixth session and oil traded near $47 a barrel after flooding from Tropical Storm Harvey shut refineries in Texas, with energy companies bracing for a second hit.

Motor fuel prices rose as much as 1.6 percent in New York, while New York oil futures added 0.5 percent after slumping to the lowest level in five weeks on Monday.  Harvey , which made landfall on Friday, drifted into the Gulf of Mexico and is poised to regain strength before crashing ashore again near the Texas-Louisiana border Wednesday. Shale output may halt as a prolonged shutdown of refineries and pipelines limits transport options for crude.

Oil has lost almost 7 percent this month as investors weighed signs of rising global supply against production cuts by members of the Organization of Petroleum Exporting Countries and its allies. Harvey has shuttered about 2.35 million barrels a day of crude and condensate capacity and is now heading toward eastern Texas, home to Motiva Enterprises LLC's Port Arthur refinery, the nation's largest.

“Gasoline is leading the way because there is a bit of a pinch on refining,” said Jonathan Barratt, chief investment officer at Ayers Alliance Securities Ltd. in Sydney. “If this had happened a month ago, we probably would have seen a more significant rise because of the seasonally strong summer demand period. Crude production is more of an issue because of those closed refineries, but prices still remain in a range and don't look like breaking out.”

Gasoline for September delivery climbed as much as 2.77 cents to $1.74 a gallon on the New York Mercantile Exchange, and traded at $1.7374 at 1:38 p.m. in Hong Kong. Prices added 2.7 percent to close at $1.7123 Monday after advancing as high as $1.7799, the highest intraday price since July 2015.

See also: Full U.S. Gas Tanks May Ease Risk of Fuel Shortages From Harvey

West Texas Intermediate crude for October delivery gained 21 cents to $46.78 a barrel after dropping 2.7 percent Monday to $46.57. Brent oil rose 21 cents to $52.10 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $5.31 to WTI.

“There is going to be a fair bit of market nervousness until we get to the stage where people can assess the extent and likely duration of refinery closures in the U.S.,” said Ric Spooner, an analyst at CMC Markets in Sydney.

Flint Hills Resources LLC is planning to restart the Corpus Christi West refinery in Texas, according to a filing with regulators. The area near the Louisiana line has 1.65 million barrels a day of refining capacity, including Exxon Mobil Corp.'s Beaumont plant, according to Andy Lipow, president of Lipow Oil Associates LLC.

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