US Taps Strategic Petroleum Reserve After Hurricane Harvey

US Taps Strategic Petroleum Reserve After Hurricane Harvey

According to Reuters, the release - the first emergency release from the reserve since 2012 - will include 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil.

Gasoline prices have increased by at least 10 cents a gallon since Harvey came ashore and caused record flooding, shutting down oil refineries along the Texas and Louisiana coasts. The government will lend the crude to Phillips 66, which is required to replace the oil at a later date. Those supplies serve as cushions during emergencies like Harvey, which knocked out large swaths of oil and gasoline production. The reserve now holds 679 million barrels of oil, which is reportedly enough to meet USA demand for 33 days.

Refineries with output of 4.1million barrels per day (bpd) went off-line on Tuesday, cutting off 23% of U.S. production, Goldman Sachs said. On Thursday, Colonial Pipeline shut down a crucial artery in the nation's fuel supply network that provides more than 3 million barrels of diesel, gasoline and jet fuel daily to major cities from Houston to NY.

And while gasoline has soared to 2 year highs as shown earlier...

The Motiva shutdown sent after-settlement gasoline prices up to 1.8180. It runs underground and is now under water in many parts of Texas, where inspections are needed before it can be fully operational again, Colonial spokesman Steve Baker said Thursday. Prior to that, exchange agreements also occurred in 2008 during Hurricanes Gustav and Ike.

The Department of Energy hopes the release of 500,000 barrels of reserve crude will offset the fuel shortage and stabilize prices.

Flooding knocks out USA refineries, crude hit by supply disruptions
The impact of the storm overshadowed the latest weekly figures on U.S. oil supplies from the American Petroleum Institute. WTI versus Brent reached $5.92 a barrel on Tuesday, its widest in more than two years.

The oil will be delivered to the Phillips 66 refinery in Lake Charles, Louisiana, a department statement said. The sale was the first in a series of planned draw-downs through 2025 totaling nearly 190 million barrels, or 27% of the reserve.

The expected United States crude build-up on Tuesday widened the WTI discount to Brent to $5.64 per barrel, its widest in over two years.

"The global implications of a stormy season in the U.S. Gulf of Mexico have mounted as the U.S. has emerged as a global energy hub", said Ed Morse, head of commodities research at Citigroup Inc.in NY.

Retail gas prices in the US climbed another 4 cents Thursday, and 10 cents in the past week to a national average of $2.449 per gallon, according to AAA.

Analysts at Goldman Sachs and Stifel said they expected USA infrastructure outages to last several months but said it was hard to estimate the exact damage.

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