Hurricane Harvey sunk U.S. crude prices by 2.44% on Monday after the massive storm forced closures at multiple refiners in the Gulf of Mexico.
Harvey, which began last Friday and caused devastating floods in the Houston area, helped send oil prices lower on Monday. U.S. crude oil futures closed at roughly $46.70 a barrel, their lowest price in the last month.
Oil prices fell because the tropical storm forced oil companies to shut down a ton of production off the coast of Texas. The coastline from Corpus Christi, Texas to Lake Charles, Louisiana is home to roughly a third of the oil refining capacity in the U.S.
Production at 98 of the 737 manned platforms in the Gulf of Mexico has been shut down, according to a Bureau of Safety and Environmental Enforcement report published on Monday. Five of the 10 non-dynamically positioned rigs have also been evacuated. Roughly 19% or 331,370 barrels of overall daily oil production in the Gulf of Mexico has been halted temporarily.
Shares of some of the biggest U.S. oil and gas ETFs dipped on the first day of trading after the storm hit. The iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) and the VanEck Vectors Oil Services ETF (OIH - Free Report) fell by 0.70% and 1.03%, respectively. Shares of the United States Oil Fund LP (USO - Free Report) sunk by 2.05%, while United States 12 Month Oil (USL - Free Report) dropped by 1.80%.
Shares of Shell (RDS.A - Free Report) , Exxon Mobil (XOM - Free Report) , BP (BP - Free Report) , and Chevron (CVX - Free Report) all fell marginally on Monday.
The flooding in Houston and the huge temporary shutdown of a large amount of oil production in the Gulf of Mexico helped gas prices skyrocket on Monday. Gasoline prices touched a two-year high after benchmark gasoline futures hit $1.7799 per gallon.
U.S. gasoline futures for September delivery jumped by more than 3.5% to close at $1.7253 a gallon on Monday. The flooding in Texas and the drastic slowdown in oil production is likely to help keep this trend going in the near future, even though many big-time oil and gas companies have already discouraged sellers from price gouging.
"I'm very, very worried about Houston, Beaumont, Bay City, the triangle where so much refining is located. It's hard to forecast because, as I say, it's unprecedented and the outcomes are completely unknown," global head of energy analysis at Oil Price Information Service, Tom Kloza told CNBC's "Squawk Box" on Monday.
"The short answer is that gas prices are going higher. They're going higher at an annoying rate, not an apocalyptic rate, but it will be noticeable, particularly east of the Rockies in the next few days," he continued.
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