Harvey's Impact Said to Prove U.S. is a Leading Oil Market Driver Globally

countries that rely heavily on U.S. oil imports will feel the effects of Harvey's destruction over the next few months. File Image / Pixabay

Of the many revelations in the wake of Hurricane Harvey's destruction is that the U.S. plays a bigger role in the global energy market than some experts may have assumed,with major buyers of U.S. crude including Latin America, Mexico, Argentina, Chile, Colombia, Venezuela, Brazil, and several Central American nations expected to feel the impact of Texas's closed refineries in coming weeks,Bloomberg reports.

Europe is included in the mix, and meanwhile in Canada, TransCanada Corp. has reduced flows of Canadian crude oil on its pipelines between Cushing, Oklahoma and the U.S. Gulf Coast due to the hurricane; this in turn has forced Canadian producers to stockpile more of their crude at large storage facilities in the U.S. Midwest.

Olivier Jakob, founder of energy consultants Petromatrix GmbH, said with regards to the flooding and power failures that have reduced American fuel-making capacity by between 3.9 million and 4.25 million barrels per day (bpd), "The amount of oil lost to Harvey by the rest of the world will quickly accumulate; this will accelerate stock-draws in the rest of the world."

Ed Morse, head of commodities research at Citigroup Inc., added, "The U.S. has emerged as a global energy hub."

Another indication of the U.S.'s huge influence is the potential for supply outages to be outweighed by the destruction of demand: Goldman Sachs notes that the Houston area alone accounts for about 750,000 bpd of demand and could face a shrinkage of about 0.7 million bpd in the first month after the storm; and U.S. oil storage facilities filling up once again could ruin any chance the Organization of the Petroleum Exporting Countries (OPEC) may have had, via its production cutbacks, of rebalancing the global market.

But even clouds as thick as Harvey's have a silver lining, and Bloomberg Markets points out that the effect of the storm on markets "is opening an almost unprecedented opportunity for traders to make money, shifting around crude and refined products by ship.

"They’re already amassing an armada of tankers to send European gasoline to the U.S. and Latin America, while Asian countries are snapping up cargoes of liquefied petroleum gases -- butane and propane mostly -- to replace the loss of exports from Texas."

Earlier this week, Jim Cramer, host of CNBC's Mad Money, said crude prices could plummet to the $30s because of Harvey, however, "then it would be an absolutely fabulous buying opportunity."