The trade war with China has been a prime price mover but is now overshadowed by the bombings in Saudi Arabia. While the Saudis indicate refinery operations will be back to normal in weeks, industry experts tell us otherwise. The Wall Street Journal is reporting Saudi Arabia is reaching out to other foreign producers for crude and other products to plug gaps in its supply chain. Typically the country is a net exporter.
The optimistic projections of a return to normal of Saudi oil operations is a myth. You cannot replace refinery parts overnight. There is no “Refiners are Us” or “Refinery Depot” out there. U.S. exports will need to surge and U.S. inventories will fall and this is all bullish for oil.
On top of the above, 41 inches of rain hit the area between Beaumont and Houston, Texas – the heart of the Gulf Coast refining region. The catastrophic flooding will have some impact on oil supply. Exxon Mobile’s Beaumont refinery has shut down. This comes on the heels of refinery turnarounds already in the Gulf Coast and Midwest.
Some people are saying current flooding conditions are worse than Hurricane Harvey in 2017. Harvey left widespread destruction in its wake, including a string of refinery outages on the Texas and Louisiana Coast. Nearly 4 million barrels a day of refining capacity was knocked offline. We will get a better sense of the extent of the damage throughout the weekend and Monday.