U.S. Gas Prices Are Down As Oil Industry Rebounds from Harvey

NEW YORK, Sept 4 (Reuters) – U.S. gasoline prices fell on Monday as the nation’s oil heartland continued to claw its way back from the devastation wrought by Storm Harvey, with shipping channels, pipelines and refineries restarting operations.

Port operations across the U.S. Gulf Coast oil and gas hub were resuming, although many still had restrictions on vessel draft, according to U.S. Coast Guard updates.

Key fuel pipelines planned to restart as more of the oil refineries that feed them ramped up production.

Benchmark U.S. gasoline futures fell by more than 3 percent, and retail prices edged up by only 1 cent a gallon on Monday, according to motorists advocacy group AAA, after climbing by more than 20 cents in the wake of Harvey, which was downgraded to a storm after making landfall as a hurricane.

Harvey dumped as much as 50 inches (127 cm) of rain over Texas and Louisiana, forcing officials to close or restrict operations at ports from Corpus Christi, Texas, to Lake Charles, Louisiana. It also forced the closure of nearly a quarter of the nation’s oil refining capacity.

The U.S. Coast Guard on Monday allowed some barge traffic to enter Port Arthur, Texas, home of the country’s largest oil refinery, and is considering allowing ships to enter on Tuesday, a spokesman said.

Port Arthur was one of three Texas ports that was still closed, along with Beaumont and Port Orange. The state’s 25 other ports were operational as of Monday, some with restrictions, according to Colonel Lars Zetterstrom, Galveston District commander of the U.S. Army Corps of Engineers.

Alberto Hernandez, a watch supervisor at the U.S. Coast Guard, said on Monday that ships were exiting and entering the Houston Ship Channel, which links the Port of Houston, the busiest petrochemical port, to the Gulf of Mexico.

The channel is open to just past Exxon Mobil Corp’s Baytown refinery to vessels up to a 40-foot (12-meter) draft, while salvage efforts continued to remove a sunken drydock in an industrial portion, officials said.

Hernandez said there was no time frame for removing the drydock debris from the main stem of the channel, which is key to moving crude oil to refineries.

Restarts of pipelines that move fuel from refineries to the rest of the nation also were alleviating worries about shortages.

Colonial Pipeline Co, which transports more than 3 million barrels per day (bpd) of gasoline, diesel and jet fuel from Gulf Coast refineries to Northeastern markets, said the restart on Monday afternoon of its main distillate line between Houston and Hebert, Texas, would take “a few hours.” It plans the same restart process for the gasoline line between those points on Tuesday.

The Explorer Pipeline planned to reopen its 24-inch (61 cm) Oklahoma-to-Midwest fuel pipeline on Monday after reopening its 28-inch (71 cm) Texas-to-Oklahoma line on Sunday.

ExxonMobil said on Monday its pipeline division was initiating supply of gasoline and other fuels to the Houston area after making “significant progress” on restarting the lines.

Fuels-producing refineries also were ramping up output. Valero Energy Corp was restarting multiple units at its 335,000 bpd Port Arthur, Texas, refinery on Monday, according to regulatory filings, and the company said its 293,000 bpd Corpus Christi and 225,000-bpd Texas City refineries were back to pre-storm levels of production.

ExxonMobil’s 560,500-bpd Baytown, Texas, refinery, the nation’s second-largest, began restarting during the weekend, while Phillips 66 said it was resuming operations at its 247,000-bpd Sweeny refinery.

Crude oil operations were also edging back to normal. ConocoPhillips said its oil production in the Eagle Ford shale region was expected to reach 80 percent of its pre-storm level of 130,000 barrels of oil equivalent per day by Monday evening, while the number of U.S. Gulf oil and gas production platforms with evacuated personnel after Hurricane Harvey dropped to 14, down from 30, according to the U.S. Bureau of Safety and Environmental Enforcement.

Still, the bureau said the total of U.S. Gulf of Mexico oil production closed increased to roughly 6.94 percent, or 121,484 bpd, up from 5.5 percent on Sunday. It did not give a reason for the increase. (Additional reporting by Gary McWilliams, Catherine Ngai and Erwin Seba in Houston; Editing by Leslie Adler and James Dalgleish)