Credit Negative for Gulf Coast Refiners。    The widespread shutdown of Gulf Coast refining capacity is credit-negative for the area’s petroleum refining industry. The Texas/Louisiana Gulf Coast is home to about 45% of the US’ 18.55million barrels per day (bpd) of refining capacity. Companies risk property damage, disrupted logistics, and a lack of power because of significant flooding. Flooding – in particular – caused many companies to shut down or curtail operations, and can delay the restart of production for several weeks or even longer. However, the diversified nature of most companies’ operations and widening refining margins in response to reduced product output will largely offset the credit-negative effects.。    Most refining companies operate in multiple regions or are part of large integrated energy companies, which limits their exposure to a single event like Harvey and leaves their ratings and outlooks unaffected. Independent refiners with no Gulf Coast exposure will see positive credit effects. The severity of Harvey’s credit effect on refiners is uncertain, and while flood conditions persist, refined product shortages will propel prices upwards, widening refining margins and benefitting fuel producers overall. In the interim, as increased product imports from Asia and Europe weigh on the price of benchmark Brent crude, the widening price differential between Brent and West Texas Intermediate (WTI), the main US crude benchmark, will enhance refining margins, especially for US mid-continent refiners. However, sizable refined product inventories will restrain the upward movement in product prices and margin enhancement.。    Almost 3.0million bpd of the US’ 18.55million bpd refining capacity shut down because of Harvey, with another 1.5million bpd likely operating at reduced rates, removing some 20%-25% of US refining capacity. Refiners used controlled shutdowns to limit more permanent damage and ease their eventual return to production, but workers’ ability to return to these locations will be seriously challenged by the region’s massive dislocation of infrastructure. Flooding and other hurricane damage could significantly delay restarting facilities, and the condition of area-wide storage facilities vulnerable to flood waters poses another problem of unknown scale for refiners.。

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