U.S. Gulf Coast Refineries May Cut Output Due to Colonial Outage
Bloomberg
Published May 11, 2021 04:50PM ET
Updated May 11, 2021 07:54PM ET
U.S. Gulf Coast Refineries May Cut Output Due to Colonial Outage
(Bloomberg) -- Most U.S. Gulf Coast oil refineries are expected to trim output as an extended shutdown of the Colonial Pipeline Co. system due to a cyberattack cuts off their main conduit for getting products to markets from Houston to New Jersey.
Much of the cuts may be shouldered by refineries from Port Arthur, Texas and eastward, which lack the option of placing barrels on pipelines that serve the U.S. Midwest. About 13% of the 4.7 million barrels of capacity in that region has been cut since the weekend and that could rise to about 15%, according to estimates by London consultancy Energy Aspects.
Colonial has restarted a small section in the four days since its shutdown and doesn’t expect substantial restoration of service before the weekend. Refiners, who place as much as 2.5 million barrels a day of gasoline, diesel and jet fuel into Colonial’s system, are running out of storage and transport options.
“As the shutdown goes on longer and longer they are all going to have to take some action,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Their inventories are filling. If they don’t book tankers they are going to have to cut their operations.”
Driving Season
The last thing the big refineries dotting the Gulf Coast want to do is to make less gasoline near the start of the summer driving season that kicks off during the U.S. Memorial Day weekend at the end of May. Some had only recently recovered from winter storms that shut in production and damaged valuable equipment, or just returned units to operations after spring maintenance.
At least one refinery each in Texas and Louisiana reduced production because Colonial shut its gasoline and distillate pipelines Friday after the cyberattack. Once Colonial restores operations, products already in the pipeline can flow again, freeing up space for Gulf Coast refineries to empty storage tanks and resume normal operations.
“For the refineries, it will be less than two days,” Lipow said. “They just need Colonial to pick up the product that is in inventory to make room for increased production.”
Relief can’t come soon enough: As supplies shrink, retail gasoline pumps from Louisiana to Virginia are running out of fuel and panic buying has been reported. Refiners are eager to help refill those pumps and just need a way to get to market. Chevron Corp. (NYSE:CVX) said Tuesday in a statement that “the duration of the outage may lead to limited disruptions in supply in some areas.”
“What starts as a flow disruption may turn into an actual supply disruption if affected refiners cut back on production rates to avoid stock build ups,” the IEA said Tuesday in a report.
Get The News You Want
©2021 Bloomberg L.P.
Written By: Bloomberg
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.