Kuwait- Reconstruction in the aftermath of Hurricane Harvey’s deadly gash through Texas could prove positive for the oil market in a few months, according to Goldman Sachs Group Inc.
“More than half of the US oil refining capacity that was shut because of Harvey’s winds and rain will be back online by Thursday,” Goldman analysts said in a Sept. 5 report.
Dry post-storm weather should help minimize the loss of demand for gasoline and diesel, according to the bank.
As refineries along the Gulf Coast restart, about 2 million barrels a day of capacity will remain offline by Thursday, down from a peak of 4.6 million, Goldman estimated; about 1.4 million could remain offline through mid-September.
While fast recovering, the refining outages heavily outweigh production losses, which are about 320,000 barrels a day between the Gulf of Mexico and south Texas’s Eagle Ford shale formation, Goldman said. In total, the storm will have added about 40 million barrels to US crude stockpiles in the month following Harvey’s landfall, according to the bank. The storm will reduce gasoline supplies by 16 million and diesel by 13 million.
The Organization of the Petroleum Exporting Countries (OPEC) and producers seek to reduce world oil stocks, especially in the industrialized countries, to five-year average; Hurricane Harvey may, however, hinder this and increase the time needed to balance the market.
Harvey hurricane damage has been on the US refining sector after Saudi Aramco’s wholly-owned subsidiary, Motiva Enterprise, announced last week it would completely suspend work at the US-based Port Arthur refinery because of the hurricane.
The 603,000 barrel per day (bpd) Port Arthur Refinery was shut on Wednesday due to flooding from Tropical Storm Harvey.
In a statement last week, Motiva said it “cannot provide a timeline for restart at this time.” The oil company said it will begin assessing the refinery “as soon as the local area flooding has receded,” although Motive is uncertain about how long it will take for floodwaters to diminish.