Friday, July 9, 2010

Phil Flynn: Going Coastal

Darn, I was watching the wrong coast. The Energy Information Agency showed a big 5 million barrel drawdown in crude supply due to hurricane activity. The problem was that we were focused on the wrong hurricane. Or should I say hurricanes? All week oil traders watched with a mix of anticipation, angst and fear about the path of Hurricane Alex and its potential impact on oil operations and oil imports. Yet despite the fact that Alex did slow oil imports, it was two West Coast Hurricanes Celia and Darby that actually had more impact on the nations supply.

Normally storms in the West Coast and the Pacific do not catch the imagination of traders especially because the West Coast, while a big oil consumption market, usually does not impact the rest of the nation. The Gulf Coast on the other hand is the part of the country where the oil imports are the largest. Oil from the Gulf can get shipped via pipeline to other parts of the country where in the West Coast its imports feeds just their markets. So many assumed that when we saw that big 5 million barrel crude draw hurricane Alex was the culprit. Yet the truth is that is not the case. Total oil imports in the Gulf Coast actually increased from 5,183 million barrels to 5,529 million barrels.

Yet in the West Coast they dropped from 1,406 million barrels to 1,131 million barrels. A much larger drop and a huge drop if you look at it as a percentage of total West Coast imports. It appears that Category 5 Darby and category 3 Darby played a number on the West Coast import market. A source from the Port of Los Angeles did say that shipping activity was down. So overall, the drop in the West Coast Offset what was pretty darn large import numbers and was a big reason we saw such a large crude oil draw.....Read the entire article.

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