(Reuters) - Refiners including Exxon Mobil Corp (XOM.N) and Motiva Enterprises purchased fuel on Thursday to compensate for lost output from plants that have been shut since Hurricane Harvey hit the U.S. Gulf Coast last month, traders said.
Refiners typically sell fuel, rather than buy it. The purchases sparked concern in the market that Harvey may have inflicted damage on refineries that will take time to repair. That pushed up prices on Gulf Coast physical markets by about 5 cents a gallon, five traders familiar with the deals said.
The surge in buying also came as refiners scrambled to meet the deadline to ship on Colonial Pipeline, the largest line in the country, during the five-day period through Thursday.
Harvey dumped a record amount of rain on refineries in Texas, the heart of the U.S. energy industry. The shutdowns have cut millions of barrels of fuel supplies from the world’s largest oil consumer, pushing up prices for gasoline, diesel and jet fuel across the country.
Refiners in the Gulf are still assessing the impact of flooding on their plants and would have avoided buying fuel if they could have supplied their customers themselves, traders said.
Until Thursday, refiners in the Gulf had only fleetingly bought cargoes in the physical markets since Harvey, traders said.
The refiners will ship the fuel through Colonial Pipeline, the main transit route for fuel produced in the Gulf destined for gas stations in cities along the U.S. East Coast such as New York.
Colonial restarted sections of its main gasoline and distillate lines in Texas earlier this week after a partial shutdown when supplies from Gulf refiners dwindled and floods prevented refiners from loading fuel into the line.
It is unclear how much fuel is moving through the line currently, because Colonial does not disclose volumes shipped.
Without the purchases, refiners may have struggled to meet commitments to their branded stores along the East Coast, traders said.
Even as refiners struggle to plug supply gaps related to Harvey, new shortages have emerged in the U.S. Southeast as Hurricane Irma disrupted deliveries there.
The two largest refineries in the country were both shut down by Harvey and are projected to partially restart by next week.
Motiva aims to have the nation’s largest refinery running at 40 percent of capacity by Monday, the company said on Thursday. The plant, at Port Arthur in Texas, has capacity of 603,000 barrels per day (bpd).
Exxon’s 560,500 bpd Baytown, Texas, refinery, the second largest, may restart partial production by early next week, sources said.
A second large Exxon plant is also shut at Beaumont in Texas. The two plants combined can process about 920,000 bpd.
Exxon said on Thursday it was completing minor repairs at Baytown and sources said the company is restarting utilities at Beaumont.
Exxon is working to ensure customers are well supplied with gasoline, a spokeswoman said. She did not comment on specific fuel purchases. Motiva declined to comment on trading activity.
Harvey shut about 4.4 million barrels per day (bpd) of refining capacity, nearly 24 percent of the U.S. total.
As of Thursday, at least 1 million barrels were still shut, with another 3 million barrels of capacity in the process of restarting or running at reduced rates.
The storm also shut down oil ports and the Houston Ship Channel, one of the main routes for waterborne supplies from refineries.
The rise in cash gasoline prices reversed falls earlier this week as some plants began restarting.
Conventional gasoline rose 4.50 cents a gallon to trade at a 18 cent-per-gallon premium to benchmark U.S. gasoline futures on the New York Mercantile Exchange RBc1, traders said. Benchmark futures ended the session 0.7 percent lower at $1.6610 a gallon.
The most actively traded Gulf coast gasoline grade is A2 CBOB. Prices for that grade jumped 5 cents to trade 18 cents above the benchmark.
Reporting By Jessica Resnick-Ault and Devika Krishna Kumar, additional reporting by Erwin Seba in Houston; Editing by Simon Webb and Tom Brown