Oil prices fell and gasoline futures surged on Wednesday to another two-year high, as flooding and damage from Tropical Storm Harvey shut nearly a quarter of U.S. refinery capacity, curbing demand for crude while raising the risk of fuel shortages.
Refineries with output of 4.2 million barrels per day (bpd) were offline on Tuesday, representing nearly 23 percent of U.S. production, according to Reuters estimates and company reports. Restarting plants even under the best conditions can take a week or more.
"It will be a while before operations can return to normal and the U.S. refining industry is bracing itself for an extended shutdown," Stephen Brennock of oil broker PVM said.
U.S. gasoline futures were up 5 percent at $1.873 per gallon, having hit $1.9140, the highest level since July 2015. Diesel futures advanced by 1.7 percent to $1.6945 a gallon, having touched their highest since January at $1.7161.
On Wednesday, Valero said that due to flooding they were fully shutting their Port Arthur refinery.