Oil traders were scrambling Tuesday to move crude and fuel supplies through ports in Louisiana as Tropical Storm Harvey barreled toward the state, threatening to close the last major oil terminals still operating on the U.S. Gulf Coast.
Harvey pummeled the heart of the U.S. energy industry in Texas, dumping a record amount of rain and triggering catastrophic flooding in Houston. Harvey was the strongest storm to hit the state in more than 50 years, forcing operators to shut refineries, pipelines and ports.
Harvey was forecast to come ashore in western Louisiana near the Texas border on Wednesday. The region includes the St. James trading hub, with more than 2.5 million barrels per day (bpd) of refining capacity. It is also home of the Louisiana Offshore Oil Port (LOOP), the largest privately owned U.S. crude storage terminal.
Louisiana had become the last exit and entry point into refinery row on the U.S. Gulf Coast. Its ports import and export millions of bpd of crude and fuel. Texas and Louisiana are home to 45 percent of total U.S. refining capacity.
“Louisiana is open and being used as much as possible to discharge fuel and load exports,” a trader at a refinery said.
Other traders also said they were hurrying to take advantage of the closing window to import fuel into the U.S. Gulf as prices skyrocket. Prices in the region have risen as supply falls because of refinery closures.
According to Eikon shipping data, the Ridgebury Julia, a tanker carrying oil products, was diverted earlier this week. It was originally going to Corpus Christi, Texas. As of Tuesday, it changed its destination to New Orleans.
Buyers for Latin America, where many countries are heavily reliant on U.S. supplies, are trying to buy cargoes. Asian refiners are also keen to buy U.S. cargoes and concerned about delays of those they have already bought, shipping sources said.
The window for shipping is closing as conditions deteriorate and Harvey moves east toward refineries and ports in the state.
The prices in spot markets for gasoline in the Gulf have soared above benchmark prices in New York Harbor, according to Reuters data.
U.S. crude prices have fallen because refiners are processing less oil. That has pushed U.S. crude prices below prices for crude elsewhere, making it cheap for international refiners if they can still get a cargo out.
U.S. crude’s discount to London’s Brent futures grew Tuesday, touching the contract’s widest level of $5.90 a barrel.
A spokeswoman for LOOP declined to comment when asked about the level of interest in using the port in recent days.
In Texas, Shell was assessing the impact of Harvey, but a spokesman did not respond to a question about the status of its Sugarland terminal in St. James, used for crude exports.
On Monday, the Port of Corpus Christi Authority said it had restored power to several facilities and was working to return to normal operations next week. Transfers from one ship to another near the port have also been delayed, sources said.
Vessels moving in and out of Energy Transfer Partners’ Nederland terminal in Texas have been delayed, sources said.
An ETP spokeswoman did not respond to a request for comment on the terminal.
The Houston Ship Channel was shut, and the Port of Houston will remain closed Wednesday.
The backlog in unexported refined products will be a challenge to Texas Gulf Coast refiners, according to Sandy Fielden, an analyst at Morningstar.
Damage to roads and fuel stations may delay some refinery restarts, he said, because they would quickly run out of storage for fuel produced.