Tropical Storm Harvey’s impact on the energy industry spread worldwide as flooded U.S. refiners and closed fuel pipelines threatened to squeeze national supply, roiling global fuel markets and rerouting millions of barrels of fuel to the Americas to avert shortages.
The storm, which lashed Louisiana with rain on Thursday, has pummeled the U.S. Gulf Coast, immersing Houston, Texas, and the surrounding area in several feet of water and forcing the closure of about a quarter of U.S. refining capacity.
Benchmark U.S. gasoline prices and margins surged anew on Thursday. The jump came after the Colonial Pipeline, the biggest U.S. fuel system, said it would shut its main lines to the Northeast by Thursday amid outages at pumping points and lack of supply from refiners.
That artery can carry 3 million barrels of gasoline and other products daily.
At least two East Coast refineries have run out of gasoline for immediate delivery as they scrambled to fill barges for markets normally supplied by the Gulf Coast, two refinery sources said.
Others were seen running at higher rates to boost profitability by filling shortages.
“This is going to be the worst thing the U.S. has seen in decades from an energy standpoint,” said an East Coast market source, who declined to be named as he was not authorized to speak to the press.
On Thursday, the U.S. Energy Department said it would release 500,000 barrels of crude oil from the Strategic Petroleum Reserve to supply the refineries that are still running in an effort to stem fuel shortages.
The first emergency release from the reserve since 2012 will be delivered to the Phillips 66 refinery in Lake Charles, Louisiana, according to a department statement.
Concerns over fuel shortages ahead of the U.S. Labor Day extended weekend were mounting, said analysts at JBC Energy.
U.S. gasoline futures topped $2 per gallon for the first time since 2015, up more than 20 per cent since just before the storm began, while U.S. crude oil prices were on track for their steepest monthly losses in more than a year.
Average U.S. retail fuel prices have surged by more than a dime per gallon from a week ago, the AAA said early on Thursday.
The Gulf makes up nearly half of total refining capacity in the United States, the world's largest net exporter of refined petroleum products, and the storm is set to impact global flows.
About 4.4 million barrels of U.S. refining capacity have been shut by Harvey, including the nation’s largest refiner, Motiva Port Arthur, which can process more than 600,000 barrels a day. The total shut-in is about 24 percent of U.S. refining capacity, almost equal to Japan’s daily consumption.
The closures rattled global fuel markets, and European and Asian traders diverted millions of barrels of gasoline and diesel to the Americas to help fill that gap. But the supplies from those distant markets may not arrive fast enough to avert a crunch.
“Sourcing additional barrels from Europe is a potential solution, but an increased level of uncertainty is introduced surrounding the timeliness of delivery, given the logistics of travel time and securing tankers,” said Michael Tran, director of global energy strategy at RBC Capital Markets.
The Asian refining margin on Thursday hit $10.41 a barrel, the highest since January 2016. Gasoline prices in the region were $16.34 a barrel, also the highest since January 2016. In Europe, benchmark gasoline margins jumped to a two-year high of nearly $21 per barrel.
The U.S. disruptions have hit wholesalers. The premium for Chicago-area gasoline above benchmark futures is at its highest since June 2016, while the Gulf Coast price is at its widest above futures since August 2012.
Suppliers in Chicago were trying to secure supplies after the Explorer Pipeline, which typically carries about 350,000 barrels a day to the region, shut down.
“It’s not a significant problem at the present time, but it could turn into one,” said William Fleischli, executive vice president of the Illinois Petroleum Marketers Association, which represents 400 fuel distributors. Fleischli said much depended on how long the shutdowns last.
Average retail gasoline prices have risen to $2.449 per gallon nationwide, up 4.5 cents a gallon from a day earlier and 10.1 cents from a week ago, AAA data showed.
In Georgia and North Carolina, fuel prices are up about 17 cents and average prices in South Carolina have risen nearly 20 cents per gallon from a week ago.
Though flood waters have yet to recede, energy analysts said they anticipated potential long-term effects from the historic storm. Goldman Sachs analysts wrote Wednesday they expected about a tenth of what is now offline to stay shut for several months.
THE BIO
Ms Davison came to Dubai from Kerala after her marriage in 1996 when she was 21-years-old
Since 2001, Ms Davison has worked at many affordable schools such as Our Own English High School in Sharjah, and The Apple International School and Amled School in Dubai
Favourite Book: The Alchemist
Favourite quote: Failing to prepare is preparing to fail
Favourite place to Travel to: Vienna
Favourite cuisine: Italian food
Favourite Movie : Scent of a Woman
UAE - India ties
The UAE is India’s third-largest trade partner after the US and China
Annual bilateral trade between India and the UAE has crossed US$ 60 billion
The UAE is the fourth-largest exporter of crude oil for India
Indians comprise the largest community with 3.3 million residents in the UAE
Indian Prime Minister Narendra Modi first visited the UAE in August 2015
His visit on August 23-24 will be the third in four years
Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, visited India in February 2016
Sheikh Mohamed was the chief guest at India’s Republic Day celebrations in January 2017
Modi will visit Bahrain on August 24-25
Score
Third Test, Day 1
New Zealand 229-7 (90 ov)
Pakistan
New Zealand won the toss and elected to bat
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
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