The largest U.S. oil refinery began shutting down on Wednesday as Tropical Storm Harvey continued to batter southern Texas and made another landfall on the Gulf Coast, threatening a stretch of the refining hub in Louisiana.
Oil market analysts projected that about 20 percent of the country's capacity to refine crude oil into gasoline, diesel and other fuels was not operating Wednesday. There were few reports of serious damage to refineries on Tuesday, but flooding and continued rain made it unclear when workers would be able to reach facilities.
Closures at major refineries in the Beaumont and Port Arthur area north of Houston took even more U.S. refining capacity offline. The area, home to about 8.5 percent of total U.S. refining capacity, experienced heavy rainfall and flooding Tuesday.
NOAA Weather Forecast
Saudi Aramco-owned Motiva began a controlled shutdown of its Port Arthur facility around 5 a.m. ET on Wednesday, having gradually reduced capacity to 40 percent by Tuesday night. The 600,000 barrel-a-day refinery is the largest in the United States.
"I'm actually quite concerned about Beaumont-Port Arthur because they just got a huge amount of rain in 24 hours, and we've already seen flooding within the refineries themselves, so we don't know exactly how bad it's going to be," said Andy Lipow, president of Lipow Oil Associates.
"If it is bad, you're looking at six to eight weeks of outages over in Beaumont-Port Arthur," he told CNBC's "Squawk Box" on Wednesday.