Spot gasoline on the U.S. Gulf Coast rose to the highest level in almost four years as refineries shut as Tropical Storm Isaac approached Louisiana and a fire shut Venezuela’s largest plant.
Tropical Storm Isaac may go ashore south of New Orleans early Aug. 29 as a hurricane. Valero Energy Corp. (VLO:US) shut its refineries in Meraux and Norco, Phillips 66 idled its Alliance plant, Marathon Petroleum Corp. closed its Garyville facility and Exxon Mobil began shutting the Chalmette plant near New Orleans. Venzuela’s Amuay plant fire may boost demand for U.S. exports to Latin America.
“There’s some caution here ahead of the storm,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “It’s still a long way off before it comes ashore and a lot could happen between now and then.”
Conventional 87-octane gasoline in the Gulf jumped 18.5 cents to 32 cents a gallon over October gasoline futures on the New York Mercantile Exchange, according to data compiled by Bloomberg at 2:03 p.m. in New York. That’s the largest premium since Sept. 19, 2008, when the Gulf Coast was ravaged by hurricanes Gustav and Ike.
A total of 15 percent of fuel-making capacity in the region has been shuttered, according to Bloomberg data. About 78 percent of Gulf oil production was shut in as of 12:30 p.m. East Coat time today, the Bureau of Safety and Environmental enforcement reported.
“If you’re short, you want to cover,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “The good news is these will be orderly shutdowns and one would hope this would be short-term in nature.”
A hurricane warning was posted from Louisiana to the Florida panhandle. Isaac was about 280 miles (450 kilometers) southeast of the mouth of the Mississippi River at 2 p.m. East Coast time, with top winds of 65 miles per hour, the National Hurricane Center in Miami said. It was moving northwest at 14 mph.
The Louisiana Offshore Oil Port, the single largest entry point for crude coming into the U.S., planned to suspend offloading oil tankers today. Between 900,000 barrels and 1 million barrels of oil a day is offloaded at the LOOP, Barb Hestermann, a spokeswoman for the port, said yesterday.
“I’m guessing you see other refineries at minimum rates because there’s not going to be crude up the Mississippi and the Loop is shutting operations,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Conventional, 87-octane gasoline in Chicago jumped to a 44- cent premium to October futures from a 5-cent discount to September futures last week.
About 16 cents of the increase can be accounted for by the switch today to pricing against October futures, said Lewis Adam, president of ADMO Energy LLC, a supply consultant in Kansas City.
He said the rest of the gain came after Marathon, which has a refinery in Robinson, Illinois, announced it would close its Garyville refinery in Louisiana because of the storm.
“Garyville pumps lot of barrels to Robinson for processing,” Adam said. “I think Marathon was a big buyer up there.”
In New York, conventional 87-octane gasoline gained 7.13 cents to trade at a 5-cent premium to September futures, the highest level since November.
Ultra-low sulfur diesel in the Gulf Coast increased its premium to futures widening 2.75 cents to 11.63 cents a gallon, the strongest performance since Oct. 2, 2008.
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