South Texas and Louisiana residents got no respite from the remnants of Hurricane Harvey, as torrential downpours added to record flooding in Houston and other areas in the region. Harvey’s impact on the local economy has been close to a worst-case scenario, and energy investors are rightfully concerned about the storm’s long-term impact on oil and gas stocks.
The latest estimates from Barclays suggest Harvey knocked out between 2 and 3 million barrels per day of oil refining capacity, more than 500,000 barrels per day of crude oil production and roughly 1.5 billion cubic feet equivalent of natural gas production. A natural disaster was the last thing a struggling U.S. oil industry needed, and the fact that Harvey knocked out far more refining capacity than production capacity has made things even worse.
The U.S. national average gasoline price has jumped to $2.39 per gallon, up 4.7 cents from its average price last week, according to GasBuddy. At the same time, refining disruptions have added to the crude oil glut, sending WTI crude price down 3 percent in the past week to the neighborhood of $46 per barrel.
But while all oil companies that rely on higher oil prices are suffering, oil refiners that are not directly impacted by the storm could benefit from lower crude prices and rising demand. CNBC analyst Jim Cramer says Valero Energy Partners (Nasdaq: VLP) is a prime example of a stock that could see meaningful earnings upside from Harvey.
“Valero is the single most dominant refiner in the country, and on the company’s website it says that it’s not experiencing any material shutdowns in its operations,” Cramer says. “There should be an immediate spike to Valero’s earnings.”
Other leading U.S. refiners with little exposure to the South Texas region include Delek U.S. Holdings, (DK), PBF Energy (PBF) and HollyFrontier Corp. (HFC). Meanwhile, exploration and production companies with major operations in the region, including oil stocks like Anadarko Petroleum Corp. (APC), Cimarex Energy Co. (XEC) and Apache Corp. (APA), are all losing…
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