How much will a Valero (VLO) fire kindle crude oil prices?

2022-06-25 06:21:40 By : Mr. William Wang

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Valero Energy (VLO) and crude oil are both down after a massive fire destroyed a terminal used to offload crude oil headed for Valero's Benicia refinery in California.

Shares of the San Antonio, Texas-based oil company, dipped 2% to close at $100.90 per share Monday.

The blaze started on Saturday near the Amports port terminal and burned near petroleum coke silos. Fire crews worked through the night to contain the fire, which spread along the underside of the pier structure. The pier was built with large creosote coated timber covered by a thick asphalt road surface.

“I think this is going to (create) some real issues,” Phil Flynn, senior analyst with Price Future Group, told “This is going to have some reverberation” on prices and supplies.

According to the refinery’s website, the 900-acre facility produces 170,000 barrels per day. It refines crude oil into gasoline, diesel, jet fuel and asphalt.

The disruption is going to be felt in the wider US diesel and jet fuel markets as supplies continue to tighten, Flynn said. Both are seeing tightening supplies as the globe emerges from the Covid-19 pandemic, but producers are slow to meet demand.

While the damage wasn’t reported to the company’s pipeline, a conveyor belt carrying byproducts of refining crude was impacted, according to a number of reports.

The conveyor belt is vital to disposing of the byproduct, called petroleum coke. Petroleum coke must be shipped away for disposal for a refinery to operate.

An email to Valero from went unreturned Monday seeking information on how much supplies will be disrupted and for how long.

Oil prices headed lower as energy traders continue to price in further crude demand destruction while China's coronavirus outbreak worsens.

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On Monday afternoon, West Texas Intermediate futures were down more than 3% on the NYMEX to $94.91 per barrel at 14:30. EDT (UTC-5). Meanwhile, Brent Crude was down 4% to $98.68 on ICE.

“WTI crude knew it was in trouble given the deteriorating crude demand outlook, stronger dollar, and after a senior US administration official said President Biden did not make a ‘concrete ask’ to India to ease up their energy purchases from Russia,” Ed Moya, senior market analyst for OANDA told

The oil market is getting beat up and it might take exhaustion from the strong dollar trade for it to stabilise. Tuesday’s inflation report may be key for commodity markets as it could potentially show the peak with inflation and trigger an end to this move with the dollar, Moya said.

“The market is still vulnerable to a major shock if Russian energy is sanctioned, and that risk remains on the table,” he said. China’s Covid-19 situation will likely see growing resistance as these massive lockdowns are occurring as severe illness cases remain extremely low, but changes to the zero-Covid policy won’t happen for many months. Oil prices will play tug-of-war here as crude inventories remain low, but energy traders will struggle to shake off these steady announcements of new Covid restrictions in China.”

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