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Most Gulf Coast refineries are shutdown or at reduced rates and
large portions of the waterborne export terminals, rail, and
pipeline infrastructure have also been impacted in the wake of
Winter Storm Uri.
Refining Capacity Impacts
IHS Markit currently estimates more than 5.2 million barrels per
day (b/d) of Gulf Coast capacity and 730,000 b/d in PADD 2 has been
impacted by the winter weather. Unlike the major damage caused by
Hurricane Harvey in 2017, refineries appear to be in relatively
better condition, and we expect the vast majority of refining
capacity will likely be able to quickly restore operations once
power and natural gas supplies return to normal levels.
Production Impacts
A large volume of crude oil and natural gas production is
shut-in due to lack of electricity and problems with pipes, roads
and personnel. Point Logic by IHS Markit estimates that close to
20% of lower 48 U.S. natural gas production has been shut-in in the
first half of February, with the Permian Basin accounting for the
largest share. While precise crude oil production figures are not
available, an equivalent 20% cut in lower 48 U.S. crude oil
production would imply a production drop of around 2-2.2 million
barrels per day (MMb/d) of output, but this could prove to be even
higher—perhaps as high as 4 MMb/d.
Pipeline Impacts
Major pipelines serving the east coast with USGC supply appear
to be functioning. Colonial Pipeline released a statement stating
they are "continuing operation of the system and will make
operational and scheduling adjustments, as needed, to prioritize
safety and continuous operation of the system." However, refineries
may have issues supplying the pipeline and may need to draw down
inventory. Export terminals impacted by the storm includes the
Houston Ship Channel, Freeport, Corpus Christi, Sabine Pass and
Lake Charles.
Transportation Impacts
Transportation demand in Texas for both gasoline and diesel is
expected to be negatively impacted as the storm has shut down all
major metropolitan areas including Dallas/Fort Worth, Houston,
Austin, San Antonio and El Paso, which represents approximately 20
million residents. Major airports were also shut down due to the
storm.
Price Impacts
Futures price, as well as physical product prices, reacted
swiftly with gasoline leading the charge. Refined product futures
have also moved significantly higher on the refining downtime on
the Gulf Coast. Spot markets have been relatively "homogeneous"
throughout the country, a relative rarity.
Of the U.S. spot gasoline markets, a little over a nickel separates
the highest and lowest prices. Weather is still supportive for
diesel prices, though the gains in the ULSD futures contract have
been modest in relation to RBOB. Nevertheless, prices are or near
more than one-year highs in the $1.80 per gallon area.
