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Cheap Oil And Costly Fuel Are Rare Windfall From Harvey for Asia – Bloomberg

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The shutdown of almost a quarter of U.S. crude refining capacity in the wake of Hurricane Harvey is presenting a rare opportunity for fuel traders in Asia.

A spike in American gasoline prices as the storm cuts off supplies is drawing shipments from as far away as Singapore. The disruptions are also weighing on global crude futures, helping drive up processing profits thousands of miles away from Harvey’s trail of destruction on the U.S. Gulf Coast. Returns from making oil products in Asia have soared to the highest level in more than 1 1/2 years. Even companies that aren’t transporting fuel west are benefiting, according to Indian Oil Corp., the nation’s top refiner.

Traders have hired vessels to ferry at least 105,000 tons of processed products from Singapore to America next month, and are seeking to charter more. Tankers have been booked to transport gasoline from Europe to the U.S., and the fuel is now set to be shipped over even longer distances as the premium of American prices soar relative to those in Asia. Additionally, Indian Oil says demand is strong enough for refiners that don’t export to stick to domestic markets and enjoy cheaper feedstock and higher fuel prices.

“Harvey is creating a dual benefit for Asian refiners,” said Arun Kumar Sharma, finance director at Indian Oil. “The shutdown of U.S. refineries is pulling down crude prices and pushing up prices of petroleum products. This will have a double-impact on refinery margins, especially in Asia.”

The profit from turning a barrel of Dubai crude to fuel in Asia has soared to $9.06 a barrel, the most since January 2016, according to data compiled by Bloomberg. The margin was less than $6.50 on Monday. West Texas Intermediate crude, the U.S. marker, slumped almost 4 percent this week through Wednesday while Brent, the benchmark for more than half the world’s oil, dropped about 3 percent.

After blasting along the Texas coast as a hurricane last week, Harvey has made landfall a second time in Louisiana as a Tropical Storm, drenching the states in rain and hampering energy infrastructure. It’s reduced U.S. fuel-making capacity by about 4.25 million barrels a day to the lowest since 2010. A combined 23 percent of American capacity is at least partially offline.

Costlier Gasoline

Cheap Oil And Costly Fuel Are Rare Windfall From Harvey for Asia – Bloomberg}

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