US Gulf gasoline prices spike as storm approaches coast

27 August 2012 16:48  [Source: ICIS news]

HOUSTON (ICIS)--US gasoline prices in the US Gulf region spiked on Monday as Tropical Storm Isaac barrelled its way toward the US Gulf coast.

Spot prices for regular unleaded gasoline in the US Gulf (USG) traded at a premium of 30.00-35.00 cents/gal over gasoline futures on the NYMEX on Monday morning. On Friday, USG spot prices were at a premium of 13.00 cents/gal.

US gasoline futures on the NYMEX for the September contract were up by 6.25 cents/gal as of 9:45 hours Houston time (15:45 GMT) to trade at $3.1405/gal.

Additionally, spot gasoline prices in the New York Harbor region were also higher, though the rise was not nearly as dramatic as those in the USG.

A refinery explosion in Venezuela that killed 41 people was also affecting prices and tightening supplies, especially on the US east coast, sources said.

Several large refineries on the US Gulf coast have already started shutting down in preparation for the storm, which was expected to make landfall by Wednesday.

"Really what we're seeing here is a disaster for the Labor Day Holiday weekend," said analyst Phil Flynn said. "There is already a panicked state of mind for the Gulf coast."

He said forecasts indicate Isaac may be a category 2 hurricane by the time it makes landfall on the US Gulf coast. That means it would have winds of at least 96 miles/hour (154km/hour).

Potential damage from the wind as well as the threat of flooding could knock refineries off line and keep gasoline prices elevated for weeks, Flynn added.

“Higher prices may linger, but much depends on the exact track of the storm, restoration times, and when necessary, repair times. A weak category 1 storm may cause more concern than actual damage,” said Patrick DeHaan, analyst with GasBuddy.com.

DeHaan added that the storm may also affect the upcoming gasoline blending change. As the summer gasoline blending season nears its end, refineries will switch to processing higher winter-grade Reid Vapor Pressure (RVP) gasoline blends by mid-Septemeber.

“Any increases in gas prices may last several weeks or worse, depending on damage. There may be some relief after 15 September, or, in a worst case situation, I can see refineries requesting RVP waivers to make the switch sooner in some areas if supply becomes an issue.”

Additional reporting by Anna Matherne


By: Bobbie Clark
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