HOUSTON – Hurricane Harvey was on the brink of becoming a Category 3 storm, which would make it the worst system since 2008 to strike the heart of America’s energy sector and the strongest storm to hit the U.S. since Wilma in 2005.
Harvey strengthened to a Category 2 hurricane around midnight in Texas and was packing top winds of 110 miles an hour, the National Hurricane Center said in an advisory posted around 1 p.m. local time Friday. That’s just short of the 111 miles per hour that would bump the storm up to a major hurricane.
Hurricane Harvey is menacing Texas’s Gulf Coast, home to as much as half of the nation’s oil refining capacity and a massive network of pipelines that carry oil and gas to the rest of the country. It’s forecast to inundate Houston, Corpus Christi and Galveston, cities with more than 2.6 million people combined, with drenching rain and life-threatening flooding. The storm may generate $1.9 billion of economic losses and $1.3 billion in insured losses, according to Bloomberg Intelligence.
“It is becoming pretty clear this morning that Harvey will be mentioned alongside Katrina and Sandy in the history books,” said Todd Crawford, chief meteorologist at The Weather Company.
Harvey has drifted from the southern Gulf of Mexico, regaining strength after passing over Mexico’s Yucatan Peninsula earlier this week. While its course has spared much oil and natural gas production in the Gulf, it’s set to hit a cluster of refineries that process almost 5 million barrels of oil a day. Harvey was 85 miles southeast of Corpus Christi, according to the advisory. It could come ashore close to midnight Friday, said Crawford.
Harvey could deliver a one-two punch that could also spell trouble for the Houston Ship Channel, said Jeff Masters, co-founder of Weather Underground in Ann Arbor, Michigan. One forecast model shows the storm returning to the Gulf of Mexico before making a second landfall closer to Galveston, sending a storm surge into the channel, which carried more than 163 million tons of cargo in 2014.
The surge, coupled with the rains, could bring about water levels “higher than we ever recorded in the Houston metropolitan area,” Masters said.
About 1 million barrels a day of crude and condensate refining capacity in Texas has been shut down by companies including Valero Energy Corp., according to company statements, government releases and people familiar with the situation. About 10 percent of Gulf of Mexico oil production has also been shuttered.
Gasoline futures in New York retreated after surging to the highest in four months in intraday trade. Futures were down 0.5 percent to $1.6564 a gallon 1:33 p.m. in New York. Oil traded at $47.69 a barrel.
Harvey may dump as much as 35 inches of rain on areas of Texas over the next week. The Federal Emergency Management Agency is sending staff and supplies to the region. Flooding will probably close roads and inundate plants, while strong winds may disrupt utilities’ systems and knock out power to hundreds of thousands of homes and businesses, leading to a loss of natural gas used to generate electricity and lower prices.
“We may see major demand destruction on a scale we haven’t seen since Ike in 2008,” said Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland, said by telephone.
The Port of Corpus Christi closed for all vessels sailing in or out as part of its hurricane preparations, officials said in an emailed statement. The U.S. Coast Guard shut Houston-Galveston ports to inbound vessels, and energy companies are shutting fuel terminals.
“It is definitely going to be an issue for the ship channels,” said Shunondo Basu, a meteorologist and natural gas analyst at Bloomberg New Energy Finance.
Texas Gov. Greg Abbott declared a state of disaster for 30 counties and evacuations have begun. A hurricane warning has been issued from Port Mansfield to Sargent, Texas. A storm surge of up to 12 feet may occur near the Padre Island National Seashore to Sargent. Storm surges account for close to half of all hurricane deaths.
Hurricane Ike, a Category 2 storm when it struck near the mouth of the Houston Ship Channel in 2008, killed 103 people across the Caribbean and the U.S., including at least 21 in Texas, Louisiana and Arkansas. It caused about $29.5 billion in damage, according to a 2009 National Hurricane Center report. Property analytics firm CoreLogic estimated Thursday that 232,721 homes along the Texas coast with a reconstruction cost value of about $39.6 billion were at risk of storm surge damage.
Other businesses and markets affected:
Anadarko Petroleum, ExxonMobil, Royal Dutch Shell are among the energy explorers that have shut platforms in the Gulf of Mexico; ConocoPhillips and EOG. Midstream shut gas capacity in south-central Texas; and Enbridge Inc. evacuated non-essential workers from some platforms. BNSF was halting traffic from Galveston Island late Thursday and holding Galveston-bound trains until further notice. Cameron LNG begins evacuating workers ahead of Hurricane Harvey.
