As Hurricane Harvey bears down on Texas, the storm is already affecting oil prices. On Friday morning Harvey remained a fierce Category 2 storm, but it’s forecast to reach Category 3 before making landfall.
In anticipation of the storm, oil and gas companies Royal Dutch Shell, Anadarko Petroleum, and Exxon Mobil started evacuating their offshore rigs in the area, CNBC reported. Four oil refineries shut down on Thursday and others were considering closing as well. Combined, around 870,000 barrels per day of refinery output has been halted, The Street reported today. The storm could be the most powerful to make landfall since Hurricane Wilma hit Florida in 2005.
The storm caused oil prices to rise on Friday as investors anticipated lower supplies. West Texas Intermediate crude futures were up 10 cents to $47.54 a barrel around 9 a.m. Eastern Time, and global benchmark Brent crude futures went up 35 cents to $52.01 a barrel, The Street reported.
In the United States, Gulf of Mexico production accounts for 17% of the country’s crude oil output and 5% of the country’s dry natural gas, according to the U.S. Energy Information Administration. The government also says that the Gulf is home to more than 45% of total U.S. petroleum refining capacity and 51% of total U.S. natural gas processing plant capacity.
Although some are speculating that Hurricane Harvey could send crude oil prices to $50 a barrel, The Street’s Tom Terrarosa cautioned that oil prices might not find as much support as traders are hoping. A macro strategist from Seaport Global Securities LLC told the energy and industrial sector reporter that the storm will likely weaken demand for gasoline because of electricity outages and difficulty traveling through wreckage.