Tropical Storm Harvey could threaten refineries in Galveston, Texas and Louisiana that have 4 refineries alone in Lake Charles, Louisiana and a total of 18 in the state. Flooding is a severe risk so we will monitor the events of Harvey moving back into the Gulf of Mexico moving east-northeast at 3 knots which is a bad sign for Louisiana and the National Hurricane Center cone of Harvey’s movement directly through the state Wednesday and Thursday and hitting Arkansas, Mississippi, and Alabama on Friday. In the overnight electronic session the October Crude Oil is currently trading at 4661 which is 4 tics higher. The trading range has been 4696 to 4639.
On the Natural Gas front the September contract expires today. And so far there has been pretty quiet trade with refineries in Galveston shutting down and talk of getting Houston refineries back online with some pinpointing as early as Wednesday or Thursday. In the overnight electronic session the October Natural Gas is currently trading at 2.966 which is a ½ of a cent higher. The trading range has been 2.975 to 2.934.
On the Corn front the market just can’t seem to get legs under it even at these price levels where sellers do not see much more downside that would be worth the risk with the move we have seen this summer. Early frost and remnants of Harvey could even be more demand destruction which will keep investors guessing how this will effect deliveries in this market. In the overnight electronic session the September Corn is currently trading at 333 ¾ which is 2 ¼ cents lower. The trading range has been 336 to 333.
On the Ethanol front there were no trades posted in the overnight electronic session. The October contract settled at 1.457 and is currently showing 1 bid @ 1.457 and 1 offer @ 1.465 with Open Interest at 954 contracts.
— Daniel Flynn
The Energy Report: Relentless
Tropical Storm Harvey continues to add to misery and this storm just will not go away. It was not enough to hit as a category 4 hurricane but massive flooding and the real possibility that this storm is ready to regenerate and possibly boomerang around for another shot at the Gulf Coast is a nightmare scenario that we pray does not happen. Even if the storm does not regenerate, record rainfall is going to see flood waters continue to rise and raise the very real possibility that Hurricane Harvey will be the most expensive storm in US history.
For the US energy industry, the relentless nature of this storm provides challenges unlike anything they have seen before. Despite almost insurmountable logistical challenges, the US energy industry was already making amazing steps to try to start bringing refineries back on line. Yet will their efforts be thwarted as Tropical Storm Harvey gets ready for another go around and will the storms force the shutdown of the country’s largest refinery and shut down even more production.
As of yesterday, oil and gas producers acually brought some production back on line in the Gulf of Mexico. For oil, only 18.94% of production is shut in and for gas 18.12%. The Bureau of Safety and Environmental Enforcement (BSEE) also reported that at 11:30 CDT yesterday personnel have been evacuated from a total of 98 production platforms, 13.3 percent of the 737 manned platforms in the Gulf of Mexico. Personnel have been evacuated from five rigs (non-dynamically positioned (DP) rig), equivalent to 50 percent of the 10 rigs of this type currently operating in the Gulf.
Also, refiners in Galveston are looking to restart but may have to delay it if Tropical Storm Harvey comes back around, according to Bloomberg. Valero Corpus Christi and Citgo Corpus Christi are said to be preparing for restart. As far as refineries that are shut right now we have: Shell Deer Park, Exxon Baytown, Flint Hills Corpus Christi, Valero Three Rivers, Phillips 66 Sweeny, Petrobras Pasadena, Valero Houston. Refiners running at reduced rates are Marathon Galveston Bay, Exxon Beaumont Lyondell Basell Houston.
Magellan shut down its pipeline in Houston raising gas prices in the Midwest and now WKRN reports that the Colonial Pipeline says their system was affected in Houston by Tropical Storm Harvey and are interrupting service which should send prices higher in the East Coast. The company says they are responding to the impact of the storm in Houston and its surrounding areas, which includes Pasadena and Cedar Bayou Service that has been interrupted until Colonial says it can assess the damage and make any necessary repairs.
Of course the supply side must be balanced with demand destruction fears. Vacationers going to the Gulf Coast may stay home dampening US oil and jet fuel expectations. With the airport closed for the foreseeable future in the fourth largest city in the U.S., it will give you just a bit of an idea how bad demand might get hit.
In the mean time dollar weakness and crazy North Korea shooting off a Baltic missile towards Japan is giving safe havens a boost.
— Phil Flynn
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