Houston (September 1, 2017) – IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions, is releasing periodic updates on the impact of Tropical Storm Harvey on the crude oil, refining and chemical sectors.

A summary of the latest update (as of 6:00 p.m. ET Friday, September 1) follows below.

The complete report is available at http://bit.ly/2gyn6zB

Crude

• Gulf of Mexico production continues to recover, and with no reports of major damage to offshore platforms, it appears Gulf production is set for a complete recovery.
  
  
• As of Friday, the volume of crude production still shut-in had declined to about 153,000 b/d (equal to around 9 percent of total Gulf of Mexico production), down from 324,000 b/d just two days ago. Natural gas production shut-in has now declined to about 0.4 Bcf/d (about 13 percent of Gulf production) from 0.6 Bcf/d on Wednesday.
  
  
• Onshore production in the Eagle Ford is also expected to return quickly. As much as 500,000 b/d of Eagle Ford shale production (about a third of the play’s output) was shut-in in response to the storm, but is now returning.
  
  
• Crude logistical disruptions are also showing signs of recovery with key pipelines from the Permian Basin returning to service.
  
  
• Inland-produced crude that cannot be consumed by downed refineries is likely moving to Cushing storage.  Some will also likely be exported as ports reopen.
  
  
• Permian and Cushing WTI crude prices, however, remain about $5 to $6 per barrel below Brent, the international benchmark, reflecting in part the back up of crude caused by storm-related logistical constraints.
  
  
• IHS Markit expects little change to our Brent price outlook as a result of this storm.

Refining

• Recovery is underway within the Gulf Coast refining industry. All four Corpus Christi facilities (805,000 b/d) are restarting and should be up and running by the end of next week.
  
  
• Several Houston and Lake Charles area plants are also ramping up production. The positive news has reversed gasoline’s dramatic price run – at least within the spot market.
  
  
• The impact of the past week’s spot price rally has yet to fully reverberate down the value chain, and US retail gasoline prices are likely to rise by another 10-15 cents per gallon on average.
  
  
• The biggest question at this point is the condition of the eight shuttered Houston area refineries, which together represent 15% (2.7 million b/d) of US distillation capacity.
  
  

Natural Gas

• On the supply front, overall US production has recovered to approximately pre-hurricane levels, with Texas data remaining volatile as pipeline and processing constraints continue.
  
  
• Production losses peaked on August 28th at 2.3 Bcf/d, but by the 31st losses had declined to 0.3 Bcf/d primarily in the Gulf of Mexico.
  
  
• Over the 9 days August 23-31, approximately 11.5 Bcf of cumulative production was lost due to Harvey, spread across the Gulf of Mexico (6.2 Bcf or 54%), Texas (3.3 Bcf or 29%, and Louisiana (2.0 Bcf – 17%).
  
  
• Transco Gulf of Mexico production totaled 0.66 Bcf/d prior to the storm, fell to a low of 0.36 and rose back to 0.45 Bcf/d by the 31st leaving production still 0.22 Bcf/d lower than pre-storm levels.
  
  
• The other Gulf of Mexico pipeline which still appears to be suffering materially from Harvey-related disruptions is Garden Banks where production is about 0.1 Bcf/d lower than pre-storm levels.
  
  
• Pipelines in Louisiana which bore the brunt of the storm related losses were ETC Tiger, Gulf South, Transco, Kinetica, and TGPL.
  
  
• Pipelines in Texas which bore the brunt of the storm related losses were TGPL, Trunkline, TGT, NGPL, and Transco.
  
  
• Helping offset the losses that occurred over this period (8/23-8/31) were increases in production from the Northeast (up 0.3 Bcf/d) and Rockies (up 0.3 Bcf/d in WY and CO) and New Mexico (0.15 Bcf/d).

Natural Gas Liquids (NGLs)

• US Gas plant supply and refinery supply of NGLs are slowly recovering but are still constrained due to flood related storage and fractionation issues.
  
  
• NGL export terminals continue to remain offline due to operational issues related to the storm despite the gradual restart of the Houston Ship Channel and Freeport.
  
  
• It has been confirmed that Freeport will require dredging to increase draft levels to pre storm levels of 45 feet.
  
  
• The constrained gas plant supply and export capacity has had global implications on NGL pricing.
  
  
• Propane and butane prices remain sharply elevated versus prior to the storm. Ethane prices have fallen significantly as cracker and export demand is constrained. Higher levels of rejection (and lower ethane prices) may be required to balance the system in the near future.
  
  

Chemicals

• Logistics (ship, barge, pipeline, rail or truck) are currently a primary barrier preventing a speedy recovery from getting under way.
  
  
• Ethylene –The amount of confirmed outages has increased, pushing the percentage of total US ethylene production offline to 54% and total US ethylene consumption capacity to 35%. As of the time of this writing, no ethylene production units have been confirmed to be offline in Louisiana, although unconfirmed reports point to supply chain constraints and storage issues.
  
  
• Propylene – The amount of confirmed propylene production assets offline is 41% of the PGP/CGP and 26% of the RGP supply with another 31% of PGP/CGP supply and 5% RGP supply at reduced rates. Derivative consumption of propylene remains at 43% or relative parity to supply with another 17% at reduced rates. Most derivative plants are reporting no significant damage.
  
  
• Polyethylene – The impact of hurricane Harvey on the polyethylene industry is being felt in many ways. In previous reports we have detailed the storm’s impact on production capacity, trade, and logistics. It follows that supply disruptions or at least supply reductions of this magnitude will lead to higher PE prices across the board.
  
  
• Polypropylene – Spot prices are already being heard upwards of 5 cpp due to expectations of propylene prices increasing in September. We are also expecting PP demand to jump in the coming months in segments that use PP in markets such as carpet, appliances, and pipe as the gulf coast region will require significant supply to help with rebuilding efforts. There could also be a pull on the automotive market as there will be a large amount of vehicles in the region that will need to be replaced.
  
  
• Benzene – 80 percent of the US benzene production capacity is located in the states of Texas and Louisiana. 65 percent of the US production capacity was impacted by the storm.
  
  
• Toluene – Toluene prices have surged over the last three days as gasoline prices and blend values have spiked. The IHS blend values have increased to over $2.50 per gallon. Prior to the storm, blend values were near $2.15 per gallon. The concern over a gasoline shortage will lead to refiners focusing on gasoline production as they enter into a restart mode.
  
  
• Mixed Xylenes – Mixed xylenes production remains down in Baytown and that will affect the PX production on the site, which is also down. Deerpark is also a major mixed xylenes producer and remains down. The sites are expected to return slowly with the restart process not expected to begin until next week at the earliest. Production in Texas City is at reduced rates but there are no plans to shut down the units and the Corpus Christi refiners are in restart mode this weekend. The mixed xylenes production loss is mostly offset by the lost PX production.
  
  
• Para-xylene – As Hurricane Harvey heads inland, a little over 50 percent of the US capacity has been shutdown or running reduced due to the hurricane. Port traffic is starting to move again and that will allow product to move out and imports to arrive. The European Union is expected to send up to 20kt of PX to the U.S. Expectation is for PX to be tight over the next month but PTA production will also be hampered by a loss of meta-xylene and MEG feedstocks.
  
  
• Chlor Alkali/Vinyls – The four chlor-alkali plants previously reported to be shut down due to the storm remain off-line, and operations at others are still cut back. Constraints on the transportation of goods in and out of the region continue to plague efforts to restore normal operations. As of Friday September 1, 25% of US PVC capacity remains offline due to the hurricane impacts. The duration of the supply interruptions remains uncertain.

The complete report is available at http://bit.ly/2gyn6zB

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