Oil sector hopes to weather Harvey storm

 Monster storm Harvey slammed into a key US oil-producing region disrupting output amid the devastation, but crude stocks are high enough that the impact on the industry should be short-lived, experts said Monday.

The Texas coast, home to nearly a third of the US oil refining capacity, has been ravaged by the most powerful hurricane to hit the state since 1961.

As a precautionary measure, 105 of the 737 offshore oil rigs in the Gulf of Mexico were evacuated before the storm made landfall on Friday, according to the Bureau of Safety and Environmental Enforcement (BSEE). By Monday, 98 remained closed.

The Gulf of Mexico alone accounts for 20 percent of US production, and the BSEE said about 19 percent of the region's output remained shut down, slightly less than on Sunday.

In addition, about 18 percent of natural gas production was still suspended, down from 25 percent Sunday.

US weather services downgraded Harvey to a tropical storm on Saturday. but torrential rains have continued to drown the area and are expected to continue for most of the week.

Peak flooding is not expected until Wednesday or Thursday, jeopardizing the reopening of refineries.

US oil giant ExxonMobil announced it was shuttering its Baytown complex, one of the largest in the world. The company declined to comment on the potential impact of this closure on its output.

"ExxonMobil's primary focus continues to be the safety of our employees, contractors and the communities in the affected areas," the company said in a statement.

"We are communicating with our employees and their families to ensure they remain safe."

Goldman Sachs analysts said in a report that "information on the extent of the damages incurred by the oil and gas infrastructure remains limited at this point.

"Nonetheless, data available so far point to sizeably larger refining than production disruptions," they added.

The analysts estimated that about three million barrels a day of refinery capacity was offline as of Sunday, or 16.5 percent of the total US capacity.

"At this stage, most of the refining outages are reported as preventive, with only a few comments on minor flooding," the report said.

James Williams of WTRG Economics cautioned that additional refinery shutdowns could occur in the coming days, and that could mean a bigger hit to oil production.

- Short-term shortages -

The impact on crude production is lower than the refinery impact, with about a million barrels per day offline, or about 11 percent of total US output, according to Goldman Sachs.

"The flooding currently taking place is however leading to a greater loss of onshore supply (from the Eagle Ford) than historically has been the case," the analysts said.

And although US oil stocks are at a high level, Williams cautioned that "there may be some short-term shortages of gasoline and diesel."

While most refineries will be able to resume operations a week or two after the rains end, "some may delay restarting and perform their fall maintenance a few weeks early," Williams added.

The BSEE warned that once the storm has passed, the facilities must be inspected before they can restart operations.

The US Chemical Safety Board (CSB) issued a warning urging petroleum and petrochemical refineries to exercise extreme caution when restarting their operations, a delicate process that could take longer than expected.

All these uncertainties pushed gasoline futures prices up three percent from Friday's close, to $1.7123, retreating slightly from where it was overnight, when it reached its highest level since June 2015.

The benchmark West Texas Intermediate for delivery in October lost $1.30 Monday to close at $46.57, with the market fearing that demand for crude will be hit by the storm