United States taps crude from strategic reserves to cope with Hurricane Harvey


"Despite the country's overall oil and gasoline inventories being at or above five-year highs, until there is a clear picture of damage and an idea when refineries can return to full operational status, gas prices will continue to increase". The selloff in crude futures is not expected to fade over the short-term as analysts expect crude supplies to increase amid the slump in refinery activity.

That would bring the price of gas around Toronto to $1.329 per litre, which McTeague told CBC News is the highest the region has seen since September 2014. They've also climbed nearly 18 cents a gallon from last week's average and stand almost 21 cents a gallon above last month's average.

On Sunday, Harvey had impacted the refining of 2.2 million of barrels of oil a day. Saskatchewan and Manitoba are up 4 and 5 cents respectively, while B.C.is up three cents.

"This hurricane has thrown a spanner in the works and rebalancing is delayed further than expected", Nunan said.

The U.S. Northeast was already dealing with reduced supply.

Motiva's massive Port Arthur refinery, the largest in the US, shut down on Wednesday due to "increasing local flood conditions", while Valero also closed its Port Arthur refinery on Wednesday.

"Refineries outside the affected area may delay maintenance to benefit from high processing margins", said Commerzbank oil analyst Carsten Fritsch, adding, "Hence, the negative impact on crude oil demand and oil product supply might be less severe than feared". But McTeague says Canada simply isn't producing enough to meet that demand.

Phillips 66's Lake Charles refinery has capacity to process 239,400 barrels a day, according to data compiled by Bloomberg.

"We are hurting for the victims of Hurricane Harvey", said AAA Carolinas president Dave Parsons.

That compares with an average of about 500,000 tonnes of gasoline exported each week from Europe to the United States and Latin America.

"I think a couple of (Gulf Coast) refineries will be down for weeks and this can change", he said. Oil production disruptions have fallen below 1 million barrels a day, while about 3.9 million barrels a day of refinery capacity is offline, meaning the storm is "net bearish" for the crude market, the bank said.

Despite the nearly uninterrupted string of inventory declines over the last ten weeks, the end of driving season is drawing near and this fact, coupled with the refinery damage Harvey caused, will be certain to affect prices in an adverse way.