Damage from tropical storm Harvey could drive nearly 1 million barrels of crude oil produced in Texas out of an already-glutted oil market.
The storm, which began as a Category 4 hurricane on Aug. 25, could mean a loss of hundreds of thousands of oil in Houston and Galveston, Texas. The loss could be even steeper if Corpus Christi, Texas is factored into the model.
Oil producers ExxonMobil and Shell told reporters Sunday night that they are expecting the giant storm to force offline refineries in and around the Texas area. Shell, for instance, was forced to shut down the Deer Park refinery in southeastern Houston, which supplies more than 340,000 barrels of oil per day.
“On Sunday, August 27, 2017, we made the decision to initiate a controlled shut down of the Deer Park, Texas, refinery and chemical plant as a result of heavy rainfall and associated nearby flooding from Hurricane Harvey,” oil producer Shell said in a statement Sunday night.
Petrobras made a similar admission earlier the same day, telling reporters the company would shut down its Pasadena, Texas, refinery due to “severe weather,” according to Dow Jones. The refinery is responsible for churning out 100,000 barrels of oil.
Texas-based Exxon, meanwhile, also temporarily shuttered a massive plant in Baytown, Texas, with a capacity of more than 560,000 barrels per day, according to reports from CNBC. The Houston Ship Channel is the busiest in America and remains closed by the storm. Oil production is also taking a hit.
The Bureau of Safety and Environmental Enforcement told reporters Sunday that 22 percent of oil production in the Gulf of Mexico has capped, which accounts for about 378,000 barrels per day.
Gas prices are also expected to spike, because of the set back in oil production.
“The pop in gasoline prices is an immediate response to the closure of refineries on the U.S. Gulf Coast,” said Matt Smith, director of commodity research at ClipperData.
Harvey slowed down considerably after making landfall, with winds slowing from 130 miles per hour to about 80, but rains from the storm likely continue to pound southeastern Texas for the next four to five days, officials warned Sunday afternoon.
Warm waters from the Gulf of Mexico is giving the tropical depression new life and will continue to dump rain on Texas through the coming week and probably cause “catastrophic” flooding, forecasters said. “It’s going to last four to five days,” Houston Mayor Sylvester Turner said.
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