While the sky clears over Houston, OPEC continues, and will for the foreseeable future, to suffer the persistent remaining damage of Hurricane Harvey. A point of reference? Harvey knocked over the largest refinery in the United States.
Perhaps the single most destructive feature of Hurricane Harvey was its extermination on refineries and pipelines. Compared to earlier this week, the damage is even worse as the deluge has shifted towards Motiva, which runs US’s largest refiner in Port Arthur. On Wednesday, Motiva shut down its 600,000 bpd facility.
According to Goldman Sachs Group Inc. (NYSE:$GS), Motiva’s shut down equates to 3.9 million barrels lost per day. Additionally, the Corpus Christi, Houston, Lake Charles, Port Arthur and Beaumont ports have all closed down. This means that the ongoing recovery in production will be not only be partial, but also slow.
For instance, while other ports’ shut downs entailed controlled shut downs, Port Arthur suffered an inundation of water, meaning that the source of damage is difficult to trace. Based on statistics provided by past major Hurricanes Rita and Katrina, analysis speculates that around 10$ of the 4mb/day of refining capacity that has been hindered will remain offline for the incoming few months.
As for OPEC, without a substantial portion of U.S. refineries online, inline crude oil storage facilities in the U.S. could fill up once again. This will lead to a dip in demand, where OPEC will struggle to re-balance the market.
Ultimately, Hurricane Harvey’s destruction could be even more complicated than what we supposed and have seen so far. Storage might increase, refinery runs might bounce around, and production figures might edge up slowly — the trend lines that OPEC have become accustomed to will be all out of whack.
All in all, the severe damage to storage and processing facilities, pipelines, and ports will render a fast and calculated recovery almost impossible.
Featured Image: depositphotos/kodda
