Hurricane Harvey, which is expected to make landfall around one o’clock in the morning on Saturday, August 26, may have an impact on the near-term energy outlook for the U.S.

As of now, Harvey is classified as a Category-2 storm and is expected to be re-characterized to a Category-3 storm around the time it makes landfall. The last Category-3 hurricane to make landfall in the U.S. was hurricane Wilma in 2005, which hit South Florida.

Oil & gas infrastructure, refining capacity in the path

Baird Equity Research—in a report out today—anticipated that Harvey would potentially damage important energy infrastructure in the Gulf Coast region. Any damage to energy infrastructure could impede hydrocarbon liquid and gas flows for days or weeks.

Nearly half of the United States’ refining and processing capability is located along the Gulf Coast.

Baird’s report says that rain may be the largest threat to refining infrastructure—more so than winds or storm surge. Storm surge itself—which could rise up to 12 feet—is expected to be restricted to the corridor stretching from Port Mansfield to Sargent—the area most directly in the path of storm. Flooding is predicted to be severe and dangerous in the path of Hurricane Harvey.

Rainfall is expected to reach 15 inches, with some reports predicting up to 30 inches.

Remembering Hurricane Rita

In the past, Hurricane Rita, which was also a Category-3 storm, lowered total U.S. refinery utilization by 16.9%, down to 69.8% in 2005. The refineries then required several weeks to bring throughput up to pre-storm levels.

Baird’s report asserts that oil prices will weaken, and that fuel prices will rise. Production is not expected to be impacted too heavily, with 17% of the U.S.’s crude production and 5% of its gas production located in the Gulf of Mexico. Production could be reduced in the Eagle Ford and other plays by power loss and inland flooding.

The Thomson Reuters Oil Special Report on the subject believed this about the storm:

• Currently 11% of Gulf of Mexico offshore oil infrastructure is facing winds greater than 90 kilometers per hour (kmh). About 21% of SPAR platforms and 12% of fixed leg platforms are under threats of winds hitting speeds of 90 kmh or higher. Mobile facilities have generally shifted away from the path of the hurricane.

• Based on calculations from Thomson Reuters Oil Research, winds exceeding 90 kmh are likely to cause permanent damage to offshore facilities.

• Fixed facilities in the Gulf of Mexico could see permanent damage from the hurricane’s winds, possibly affecting 5.9% of total Gulf of Mexico oil production (which totaled 1.67 million bpd for August 2017).

• According to the forecasted track and maximum speed, Harvey could leave permanent damage 6.6% of total Gulf of Mexico total crude output as of August 26th.

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