Tag Archives: Economy

Dollar hits low note while euro shines; storms stoke worry in U.S.

Dollar hits low note while euro shines; storms stoke worry in U.S.

By Hilary Russ

NEW YORK (Reuters) – Reduced expectations for another U.S. Federal Reserve interest rate hike this year helped drive down the dollar to its lowest in more than 2-1/2 years on Friday and kept gold near a one-year high.

The euro hit multi-year peaks in the wake of a European Central Bank meeting, while U.S. crude oil prices tanked more than 3 percent as powerful Hurricane Irma roared toward Florida.

Stubbornly weak inflation continues to surprise Fed policymakers. In a speech on Thursday, New York Fed President William Dudley did not repeat an assertion from three weeks ago that he expects to raise rates once more this year.

Also dampening the dollar and lowering the chances of another rate hike was an agreement in Congress to push U.S. debt ceiling talks three months down the road to December, coinciding with the Fed’s policy meeting.

Against a basket of other major currencies, the dollar index <.DXY> was down 0.38 percent after touching a low of 91.011, its weakest since January 2015.

The safe-haven Japanese yen <JPY=> also strengthened 0.61 percent versus the greenback at 107.80 per dollar, and the euro <EUR=> rose 0.12 percent to $1.2036.

The euro’s rally built on ECB President Mario Draghi’s suggestion that it may begin tapering its massive stimulus program this fall.

Draghi referred several times Thursday to the euro’s strength and said it was the main reason for a cut in the bank’s 2018-19 inflation forecasts. He also indicated any winding down of its massive stimulus program was likely to be slow.

Those comments did little to deter euro bulls, however, and a Reuters report that central bank officials were in broad agreement that their next step would be to reduce their bond purchases also supported the currency.

The ECB “left the mystery out there” with regard to tapering, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “It creates a feeding frenzy, and the momentum that was there (in the euro) gets accelerated.”

Oil prices fell sharply on worries that energy demand would be hit by Irma, one of the most powerful storms to near the United States in a century, as it barreled toward Florida and the U.S. Southeast.

Irma is the second major storm to threaten the United States in two weeks after Hurricane Harvey shut a quarter of U.S. refining capacity and 8 percent of U.S. oil production.

“Hurricanes can have a lasting effect on refinery and industry demand,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

U.S. crude <CLcv1> fell 3.12 percent to $47.56 per barrel and Brent <LCOcv1> was last at $53.76, down 1.34 percent.

Economists have said Harvey could weigh on U.S. economic growth in the third quarter.

Spot gold <XAU=> was down 0.2 percent to $1,346.52 an ounceafter hitting $1,357.54, its highest since August 2016. It was up 1.7 percent this week, notching a third consecutive weekly gain.

U.S. shares were mixed, with the S&P ending slightly lower as investors braced for Irma and fretted that Pyongyang could launch another missile test on Saturday, North Korea’s founding day, keeping risk appetite in check going into the weekend.

The Dow Jones Industrial Average <.DJI> rose 13.01 points, or 0.06 percent, to end at 21,797.79, the S&P 500 <.SPX> lost 3.67 points, or 0.15 percent, to 2,461.43 and the Nasdaq Composite <.IXIC> dropped 37.68 points, or 0.59 percent, to 6,360.19.

Stocks elsewhere were slightly higher.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.17 percent and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> edged up 0.01 percent.

The U.S. 10-year Treasury yield fell to a 10-month low of 2.016 percent but then rose, with the benchmark notes last up 2/32 in price to yield 2.0559 percent.

(Additional reporting by Sam Forgione, Gertrude Chavez-Dreyfuss, Julia Simon and Lewis Krauskopf and Caroline Valetkevitch in New York; Editing by Nick Zieminski and James Dalgleish)

Venezuela’s monthly inflation rises to 34 percent: National Assembly

Venezuela's monthly inflation rises to 34 percent: National Assembly

By Girish Gupta and Corina Pons

CARACAS (Reuters) – Venezuela’s monthly inflation rate jumped to 33.8 percent in August, with food price rises reaching hyper-inflationary levels above 50 percent, the opposition-controlled National Assembly said on Thursday.

The government stopped releasing the data more than a year ago amid a deep economic crisis, but the National Assembly has published its own figures since January. They are generally in line with private economists’ estimates.

The latest month-on-month inflation figure was a jump from the 26 percent rise in prices reported in July.

In the first eight months of 2017, prices rose a cumulative 366.4 percent, according to the legislative body.

“Food is now in hyperinflation,” said opposition lawmaker Angel Alvarado, adding that the food sector had seen price rises of 51 percent in August.

Economists usually define hyperinflation as occurring when monthly rates exceed 50 percent.

Millions of Venezuelans are suffering from food and medicine shortages as the oil producer struggles with an economic crisis that spurred months of nationwide unrest earlier this year.

However, the protests have died down in recent weeks, with many in the opposition viewing them as fruitless after socialist President Nicolas Maduro’s government sidelined the National Assembly and created its own legislative superbody.

‘ECONOMIC WAR’

The country’s bolivar currency also weakened past 20,000 per dollar on the widely-used black market on Thursday for the first time. It has lost 95 percent of its value against the U.S. currency in the past year.

The value of $1,000 in local currency purchased when Maduro came to power in April 2013 would now be worth $1.20.

Maduro blames the crisis on the country’s opposition and the United States, whom he says are waging an “economic war” against his government.

Critics blame Maduro’s economic policies including a currency policy that pegs the bolivar at 10 per dollar at the strongest rate and the strict price controls which they say disincentivize production.

Opponents also point to a rapidly rising money supply. The country’s M2 figure is up 431 percent in the last year alone.

The exponential rise in M2 – the sum of cash, together with checking, savings, and other deposits – means an exponential rise in the amount of currency circulating.

Coupled with a decline in the output of goods and services, that has accelerated inflation.

(Writing by Girish Gupta; Editing by Paul Simao)

Hurricane Harvey boosts U.S. jobless claims to more than two-year high

FILE PHOTO: Leaflets lie on a table at a booth at a military veterans' job fair in Carson, California October 3, 2014. REUTERS/Lucy Nicholson/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits jumped to its highest level in more than two years last week amid a surge in applications in hurricane-ravaged Texas, but the underlying trend remained consistent with a firming jobs market.

The surge in claims reported by the Labor Department on Thursday offered an early glimpse of Hurricane Harvey’s impact on the economy. The storm, which unleashed unprecedented flooding in Houston, disrupted oil, natural gas and petrochemical production and forced a temporary closure of refineries.

Economists say Harvey could put a dent in third-quarter gross domestic product, but expect lost output to be recouped in the October-December period.

Initial claims for state unemployment benefits surged 62,000 to a seasonally adjusted 298,000 for the week ended Sept. 2, the highest level since April 2015, the Labor Department said on Thursday. The weekly increase was the largest since November 2012. A Labor Department official said last week’s data had been impacted by Hurricane Harvey.

Unadjusted claims for Texas surged 51,637 last week as some people found themselves temporarily unemployed. That accounted for 95.6 percent of the increase in unadjusted claims last week. Claims for Louisiana were also affected by Harvey, though they only increased 258.

In addition, claims for five states and a territory were estimated last week because of the Labor Day holiday on Monday.

JOBS MARKET STILL FIRMING

Economists had forecast claims rising to 241,000 in the latest week. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased by 13,500 to 250,250 last week suggesting the labor market continued to strength.

If, however, the flood disruptions in Texas persist, that could hurt job growth in September. The government reported last week that the economy created 156,000 jobs in August, with the private services sector hiring the smallest number of workers in five months.

Economists largely dismissed the slowdown in job growth, blaming it on a seasonal quirk. Over the past several years, the initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength.

The dollar was trading lower against a basket of currencies. Prices for U.S. Treasuries rose.

In a second report on Thursday, the Labor Department said worker productivity increased at a 1.5 percent annualized rate in the second quarter, instead of the 0.9 percent pace it reported last month. That followed a 0.1 percent rate of increase in the first quarter.

The government last week revised up second-quarter gross domestic product growth to a 3.0 percent rate from a 2.6 percent pace. Despite the upward revision to productivity, the trend remains weak, suggesting it would be difficult to achieve robust economic growth.

President Donald Trump has vowed to boost annual growth to 3 percent through tax cuts, infrastructure spending and regulatory rollbacks. Compared to the second quarter of 2016, productivity increased at a 1.3 percent rate, instead of the previously reported 1.2 percent pace. That was the strongest performance in two years.

With productivity rising, unit labor costs, the price of labor per single unit of output, increased at only a 0.2 percent pace in the second quarter. Unit labor costs were previously reported to have risen at a 0.6 percent pace. They surged at a 4.8 percent rate in the January-March period.

Compared to the second quarter of 2016, unit labor costs fell at a 0.2 percent rate as previously reported.

Hours worked rose at a rate of 2.5 percent in the April-June period as previously reported. That was the quickest pace since the fourth quarter of 2015, and followed a 1.6 percent rate of increase in the first quarter.

As a result, output per worker surged at a 4.0 percent rate, the fastest since the third quarter of 2014, after rising at a1.8 percent pace at the start of the year.

Output was previously reported to have increased at a 3.4 percent pace in the second quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Subdued by Harvey, Congress reconvenes facing fiscal tests

The U.S. Capitol building is seen at sunset in Washington, U.S. May 17, 2017. REUTERS/Zach Gibson

By Susan Cornwell

WASHINGTON (Reuters) – Hurricane Harvey devastated Texas, but could bring some fiscal order to Washington where Republicans and Democrats will need to put political differences aside in order to approve spending to repair the damage from flooding in and around Houston.

Lawmakers returning to Washington after a month-long break are expected to swiftly agree to an initial request for nearly $8 billion in disaster aid, with the House of Representatives considering assistance on Wednesday.

More requests will follow from the Trump administration, with the fractious Republicans who control the House and the Senate determined to look capable of governing in a crisis.

Some estimates say Harvey could cost U.S. taxpayers almost as much as the total federal aid outlay of more than $110 billion for 2005’s record-setting Hurricane Katrina.

That sobering cost and the urgent needs of Harvey’s victims have helped to calm a fiscal storm that had threatened to engulf Congress and President Donald Trump ahead of Oct. 1. The rancor revolves around the deadline for lawmakers to approve a temporary spending measure to keep the government from shutting down, as well as the need to raise the nation’s debt ceiling.

“There’s reason to hope that in the wake of the tragedy in Texas … there will be a renewed sense of community and common purpose that can help get things done,” said Michael Steel, a Republican strategist who once worked as spokesman for former House Speaker John Boehner.

Before Harvey, Trump had threatened to veto such spending and trigger a shutdown if Congress refused to fund his proposed U.S.-Mexico border wall. He has dropped his threat, the Washington Post reported on Friday, making a shutdown less likely.

As of the Labor Day holiday weekend, approval by Congress was widely anticipated in late September of a stopgap bill, or continuing resolution, to continue current spending levels for two to three more months.

The need to help Hurricane Harvey victims “creates another reason as to why you’d want to keep the government open,” Republican Senator Roy Blunt said on NBC’s “Meet the Press” Sunday.

FRESH START WITH TRUMP

With much of Washington distracted by tensions with North Korea over its nuclear program, Congress must also raise the federal debt ceiling by the end of September or early October to stave off an unprecedented U.S. government debt default, which would shake global markets.

The debt ceiling caps how much money the U.S. government can borrow, and some conservatives are loath to raise it without spending reforms. U.S. Treasury Secretary Steven Mnuchin on Sunday said Congress should act quickly to increase the debt limit, otherwise relief funding for hurricane-ravaged areas of Texas might be delayed.

“Without raising the debt limit, I am not comfortable that we will get money to Texas this month to rebuild,” Mnuchin said on Fox News Sunday.

Blunt, a junior member of Senate Republican leadership, said it was possible lawmakers could tie legislation raising the debt ceiling to measures providing financial aid for recovery from Harvey. “That’s one way to do it,” he said on Meet the Press.

The head of the Republican Study Committee, the largest group of House conservatives, said on Monday that Congress was obligated to help those hurt by Harvey.

But Representative Mark Walker also warned that “legislative games” like attaching Harvey aid to a debt ceiling hike could jeopardize consensus. “The debt ceiling should be paired with significant fiscal and structural reforms,” he said in a statement.

Senior Republicans were warning Trump not to anger Democrats by carrying through with his threat to curtail the Deferred Action for Childhood Arrivals (DACA) program for immigrant children, which Democrats widely support. Democratic votes will likely be needed to both raise the debt ceiling and prevent a shutdown.

Trump might have listened to them. Sources said on Sunday that he has decided to scrap the program that shields the young immigrants from deportation, but he will give Congress six months to craft a bill to replace it.

With his tendency to send conflicting policy signals and attack fellow Republicans, Trump may present the biggest uncertainty as Congress gets back to work.

The four top Republican and Democratic leaders of the Senate and House are set to hold a rare bipartisan meeting with Trump on Wednesday to chart a path forward for the multiple fiscal issues.

Senate Republican leader Mitch McConnell, who will attend the meetings, spent much of August feuding with Trump, who attacked the Kentuckian repeatedly on Twitter.

One Republican strategist said the Senate leader would not dwell on those tensions. “Basically every Republican senator is looking to put whatever nonsense happened on Twitter in August in the rear view mirror and focus on all the important work that needs to get done in September,” said Josh Holmes, a former chief of staff and campaign manager for McConnell.

(Additional reporting by David Morgan and Chris Sanders; Editing by Kevin Drawbaugh and Mary Milliken)

U.S. gasoline prices tumble as Harvey subsides

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson/File Photo

By Ron Bousso

LONDON (Reuters) – Benchmark U.S. gasoline prices slumped on Monday to pre-Hurricane Harvey levels as oil refineries and pipelines in the U.S. Gulf Coast slowly resumed activity, easing supply concerns.

Brent crude oil futures were flat at $52.75 by 1340 GMT, paring earlier losses after a powerful North Korean nuclear test triggered a shift away from crude markets to assets perceived to be safer, such as gold.

U.S. West Texas Intermediate crude futures, however, were up 34 cents at $47.63 barrel as U.S. demand, hit by reduced refinery activity since Harvey made landfall on Aug. 25, recovered.

NYMEX gasoline futures were down 3.2 percent at $1.6916 a gallon, levels last seen on Aug. 25, the day Harvey struck, crippling production and causing widespread flooding.

Still, damage to the oil infrastructure in the Gulf Coast hub by Harvey appeared less extensive than some had feared.

Harvey has now been downgraded to a tropical storm.

A number of major refineries, which convert crude oil into refined products such as gasoline and jet fuel, as well as distribution pipelines, were gradually resuming operations on Monday.

Valero Energy’s 225,000 barrels per day (bpd) Texas City refinery was the only plant reported to be running at normal rates so far.

At the same time, about 5.5 percent of the U.S. Gulf of Mexico’s oil production, or 96,000 barrels of daily output, remained shut on Sunday, down from a peak of more than 400,000 bpd last week.

“The disruptions from Hurricane Harvey in the U.S. Gulf Coast are gradually clearing. In the broader scheme of things, it appears that so far the energy industry was spared major damages to assets and infrastructure,” analysts at Vienna-based JBC Energy said in a note.

“However, some Houston area refineries will likely remain offline for some time longer.”

Traders booked dozens of gasoline tankers over the past week from Asia and Europe to the United States and Latin America in order to plug supply shortages in the wake of the shutdowns.

European gasoline refining margins dropped by nearly a fifth on Monday.

And while the U.S. government tapped its strategic oil reserves for the first time in five years last week, the head of the International Energy Agency (IEA) said the global energy watchdog still sees no need for a coordinated international release of oil stocks after Harvey.

Texas Governor Greg Abbott estimated damage at $150 billion to $180 billion, calling it more costly than Hurricanes Katrina or Sandy, which hit New Orleans in 2005 and New York in 2012 respectively.

Traders were nervously watching developments in North Korea, where the military conducted its sixth and most powerful nuclear test over the weekend. Pyongyang said it had tested an advanced hydrogen bomb for a long-range missile, prompting the threat of a “massive” military response from the United States if it or its allies were threatened.

That put downward pressure on crude as traders moved money out of oil – seen as high-risk markets – into gold futures traditionally viewed as a safe haven for investors. Spot gold prices rose for a third day, gaining 0.9 percent on Monday.

Overall trading activity in the oil futures market was expected to be low on Monday due to the U.S. Labor Day public holiday.

 

(Additional reporting by Henning Gloystein in Singapore; Editing by Louise Heavens)

 

U.S. envoy says North Korean leader ‘begging for war’ as U.N. mulls sanctions

Secretary of Defense James Mattis (L) makes a statement outside the West Wing of the White House in response to North Korea's latest nuclear testing, as Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford listens, in Washington, U.S., September 3, 2017

By Christine Kim and Michelle Nichols

SEOUL/UNITED NATIONS (Reuters) – The United States on Monday said countries trading with North Korea were aiding its “dangerous nuclear intentions” as the United Nations Security Council mulled tough new sanctions and the isolated regime showed signs of planning more missile tests.

South Korea said it was talking to Washington about deploying aircraft carriers and strategic bombers to the Korean peninsula following the North’s sixth and most powerful nuclear test on Sunday.

At a Security Council meeting, U.S. Ambassador Nikki Haley said North Korea’s Kim Jong Un was “begging for war” and urged the 15-member group to adopt the strongest possible measures to deter him.

“War is never something the United States wants. We don’t want it now. But our country’s patience is not unlimited. We will defend our allies and our territory,” Haley said.

“The United States will look at every country that does business with North Korea as a country that is giving aid to their reckless and dangerous nuclear intentions,” she said.

Haley said the United States will circulate a new Security Council resolution on North Korea this week and wants a vote on it next Monday.

China, a top trading partner with North Korea, and Russia called for a peaceful resolution to the crisis.

“China will never allow chaos and war on the (Korean) Peninsula,” said Liu Jieyi, the Chinese ambassador to the United Nations.

Russia said peace in the region was in jeopardy.

“A comprehensive settlement to the nuclear and other issues plaguing the Korean peninsula can be arrived at solely through political diplomatic channels,” Russia’s U.N. Ambassador Vassily Nebenzia said.

North Korea has been under U.N. sanctions since 2006 over its ballistic missile and nuclear programs. Typically, China and Russia only view a test of a long-range missile or a nuclear weapon as a trigger for further possible U.N. sanctions.

U.S. President Donald Trump had asked to be briefed on all available military options, according to his defense chief.

Officials said activity around missile launch sites suggested North Korea planned more missile tests.

“We have continued to see signs of possibly more ballistic missile launches. We also forecast North Korea could fire an intercontinental ballistic missile,” Jang Kyoung-soo, acting deputy minister of national defense policy, told a parliament hearing on Monday.

North Korea tested two ICBMs in July that could fly about 10,000 km (6,200 miles), putting many parts of the U.S. mainland within range and prompting a new round of tough international sanctions.

 

MILITARY EXERCISES

South Korea’s air force and army conducted exercises involving long-range air-to-surface and ballistic missiles on Monday following the North’s nuclear test on Sunday, its joint chiefs of staff said in a statement.

In addition to the drill, South Korea will cooperate with the United States and seek to deploy “strategic assets like aircraft carriers and strategic bombers”, Jang said.

South Korea’s defense ministry also said it would deploy the four remaining launchers of a new U.S. missile defense system after the completion of an environmental assessment by the government.

The rollout of the controversial Terminal High Altitude Area Defense (THAAD) system at a site south of the South Korean capital, Seoul, which is vehemently opposed by neighboring China and Russia, had been delayed since June.

At the Security Council, neither Russia nor China mentioned their long-held opposition to THAAD or the prospect of further U.N. sanctions in the wake of North Korea’s nuclear test.

North Korea said it tested an advanced hydrogen bomb for a long-range missile on Sunday, prompting a warning from U.S. Defense Secretary Jim Mattis of a “massive” military response from the United States if it or its allies were threatened.

People walk past a street monitor showing a news report about North Korea's nuclear test in Tokyo, Japan, September 3, 2017.

People walk past a street monitor showing a news report about North Korea’s nuclear test in Tokyo, Japan, September 3, 2017. REUTERS/Toru Hanai

Trump has previously vowed to stop North Korea developing nuclear weapons and said he would unleash “fire and fury” if it threatened U.S. territory

Despite the tough talk, the immediate focus of the international response was on tougher economic sanctions.

Diplomats have said the Security Council could now consider banning North Korean textile exports and its national airline, stop supplies of oil to the government and military, prevent North Koreans from working abroad and add top officials to a blacklist to subject them to an asset freeze and travel ban.

Asked about Trump’s threat to punish countries that trade with North Korea, Chinese Foreign Ministry spokesman Geng Shuang said China has dedicated itself to resolving the North Korean issue via talks, and China’s efforts had been recognized.

“What we absolutely cannot accept is that on the one hand (we are) making arduous efforts to peacefully resolve the North Korean nuclear issue, and on the other hand (our) interests are being sanctioned or harmed. This is both not objective and not fair,” he told a regular briefing.

On possible new U.N. sanctions, and whether China would support cutting off oil, Geng said it would depend on the outcome of Security Council discussions.

China’s state-run Xinhua news agency said in an editorial that North Korea was “playing a dangerous game of brinkmanship” and it should wake up to the fact that such a tactic “can never bring security it pursues”.

 

SKEPTICISM

While South Korean President Moon Jae-in and Japanese Prime Minister Shinzo Abe agreed on Monday to work with the United States to pursue stronger sanctions, Russia voiced scepticism.

Russian Deputy Foreign Minister Sergei Ryabkov said sanctions on North Korea had reached the limit of their impact. Any more would be aimed at breaking its economy, so a decision to impose further constraints would become dramatically harder, he told a BRICS summit in China.

South Korea says the aim of stronger sanctions is to draw North Korea into dialogue. But, in a series of tweets on Sunday, Trump also appeared to rebuke South Korea for that approach.

“South Korea is finding, as I have told them, that their talk of appeasement with North Korea will not work, they only understand one thing!” Trump said on Twitter.

Still, Trump’s response was more orderly and less haphazard than he had offered after North Korea’s previous hostile actions.

His handling of its latest nuclear test reflected a more traditional approach to crisis management, which U.S. officials said illustrated the influence of Mattis and the new White House chief of staff, retired Marine Corps General John Kelly.

Japanese and South Korean stock markets both closed down about 1 percent on Monday, while safe-haven assets including gold and sovereign bonds ticked higher, but trade was cautious. U.S. stock markets were closed for the Labor Day holiday.

“Assuming the worst on the Korean peninsula has not proven to be a winning trading strategy this year,” said Sean Callow, a senior foreign exchange strategist at Westpac Bank.

“Investors seem reluctant to price in anything more severe than trade sanctions, and the absence of another ‘fire and fury’ Trump tweet has helped encourage markets to respond warily.”

South Korea’s finance minister vowed to support financial markets if instability showed signs of spreading to the real economy.

(Additional reporting by Shin-hyung Lee, Hyunjoo Jin and Cynthia Kim in SEOUL, Steve Holland, David Brunnstrom, Tim Ahmann, David Shepardson and John Walcott in WASHINGTON, John Ruwitch in SHANGHAI, Wayne Cole and Swati Pandey in SYDNEY; Writing by Lincoln Feast and Jeff Mason; Editing by Robert Birsel and Paul Simao)

 

Retail U.S. gasoline prices surge as refineries warn of shortages after Harvey

A note is left on a gas pump in the aftermath of Hurricane Harvey in Cedar Park, Texas, U.S., September 1, 2017. REUTERS/Mohammad Khursheed

By Julia Simon

NEW YORK (Reuters) – Retail U.S. gasoline prices rose 2.8 percent from Friday to Saturday as refineries warned customers about fuel-supply shortages caused by Hurricane Harvey.

They were at $2.59 a gallon, according to motorists advocacy group AAA. It represents a 16.7 percent rise in the average price from a year ago.

Prices have risen more than 17.5 cents since Aug. 23, before the storm began.

Average prices in Texas, the epicenter of the storm, rose more than 3 percent from Friday to Saturday, and are up 12 percent from a week ago.

Refiner Motiva has warned customers along the route of the largest U.S. fuel pipeline to prepare for shortages after Harvey shut refineries and cut supply to the line, said a source at a fuel distributor supplied by Motiva.

Harvey shut refineries that can process up to 4.4 million barrels per day (bpd) of crude. The plants shut down include Motiva’s 603,000 bpd facility in Port Arthur, Texas, the largest refinery in the country.

Nearly half of the U.S. refining capacity is in the Gulf Coast, a region with proximity to plentiful crude supplies including Texan oil fields and also Mexican and Venezuelan oil imports.

“The refineries were built on the Gulf Coast with the idea that we’re going to import,” said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas, “That’s why we’re having problems today because that’s where they were all built.”

The reduction in fuel supplies has forced the Colonial Pipeline, which supplies fuel from refineries near the Gulf of Mexico to the U.S. Northeast, to reduce supplies.

Convenience store and gas station chain Circle K, a big buyer from Motiva, said the company was working with a limited supply.

Some crude oil pipelines have restarted operations. Magellan Midstream Partners <MMP.N> announced late Friday that it resumed operations on its BridgeTex and Longhorn crude oil pipelines. The two pipelines transport around 675,000 barrels per day (bpd) of West Texas crude oil into East Houston.

The company says it expects to resume service on its Houston crude oil distribution system over the weekend.

U.S. crude production continues to stall following the storm. As of Friday, volume of crude production still shut-in had declined to about 153,000 bpd, down from 324,000 bpd just two days ago.

(Reporting by Julia Simon Editing by Jeremy Gaunt)

Retail U.S. gasoline prices surge as Harvey keeps refiners shut

A gas station submerged under flood waters from Tropical Storm Harvey is seen in Rose City, Texas, U.S., on August 31, 2017.

By Erwin Seba and Devika Krishna Kumar

HOUSTON/NEW YORK (Reuters) – Retail U.S. gasoline prices hit two-year highs and global shipping routes were scrambled as the nation’s largest refiners remained shut on Friday, even as Storm Harvey lost strength.

Major fuel pipelines feeding the U.S. Northeast and Midwest were either closed or severely curtailed, prompting shortages in some areas and dramatic spikes in wholesale prices.

The storm, which began as a hurricane a week ago, has roiled global fuel markets, and tankers carrying millions of barrels of fuel have been rerouted to the Americas to avert shortages. European refining margins hit a two-year high amid the surge in exports.

Indeed, the effects of the storm will continue for several weeks, if not months, after Harvey hammered the Gulf Coast for days and brought floods that buried Houston and the surrounding area in several feet of water. It knocked out about 4.4 million barrels of daily refining capacity, slightly more than Japan uses daily, and the signs of restarts were tentative.

The nation’s largest refiner, Motiva’s Port Arthur facility, which can handle 600,000 barrels of crude daily, will be shut for at least two weeks, according to sources familiar with plant operations.

Other plants in the Beaumont/Port Arthur area are expected to face similar challenges restarting as waters continued to rise, even as flooding receded in Houston, some 85 miles (137 km) west.

In Corpus Christi, where Harvey first made landfall, refiners Citgo Petroleum Corp, Flint Hills Resources and Valero Energy Corp were moving to restart their plants, along with the nearby Valero Three Rivers refinery, according to sources.

Benchmark U.S. gasoline prices  have surged more than 15 percent since the storm began, but in trading Friday, the contract for October delivery lost 1 percent, the first decline in five days. September’s contract had risen by 25 percent, but stopped trading Thursday.

U.S. crude prices continued to slump along with demand, with the futures contract falling 0.4 percent to $47.02 a barrel.

The national average for a regular gallon of gasoline rose to $2.519 as of Friday morning, according to motorists advocacy group AAA, with even gaudier increases in the U.S. Southeast, which relies heavily on Gulf supplies. South Carolina, for instance, has seen prices rise nearly 30 cents, and prices were up nearly 20 cents in Texas, where fuel shortages were already evident.

 

SHORTAGE WORRIES

Suppliers in the Chicago area were taking steps to prevent shortages, and banking on hope.

Dave Luchtman, owner and president of Lucky’s Energy Service Inc., a small distributor in Chicago, has rented two storage trailers that hold 8,000 gallons each, expected to be delivered Friday.

“So I have a little lifeline,” Luchtman said.

Refineries so far have not given any indication that there are fuel shortages, said Mario Orlandi, an operations manager at Olson Service Co, which supplies diesel and gasoline to the Chicago area.

“Cross our fingers, keep our tanks full,” Orlandi said.

The global impact of the storm was being felt in Venezuela, where financially strapped state-run PDVSA is facing the possibility that scheduled deliveries – tankers floating offshore for weeks due to non-payment – will make their way to other Latin American destinations.

At least two cargoes scheduled to deliver to Venezuela currently in the port of Curacao are now expected to be delivered to Ecuador.

Mexico, Brazil, Colombia and other countries want to tap some of the 7 million barrels of fuel sitting in the Caribbean sea, according to three traders and shippers.

European and Asian traders have diverted millions of barrels of fuel to the Americas. That included a rare opportunity for exports of jet fuel from Europe to the United States, reversing the usual flow of shipments.

Supplies from distant markets may not arrive soon enough to avert a crunch after the Colonial Pipeline, the biggest U.S. fuel system, said it would shut part of its main lines to the Northeast.

“We are going to have outages from Texas to Boston,” said one East Coast market source. The market is “way under-appreciating the magnitude of this.”

Several East Coast refineries have run out of gasoline for immediate delivery as they sent fuel elsewhere, and concerns over shortages ahead of the U.S. Labor Day extended weekend were mounting.

 

(Reporting by Erwin Seba and Devika Krishna Kumar; Additional reporting by Jarrett Renshaw, Susannah Gonzales, Marianna Parraga, Karolin Schaps, Ron Bousso, Libby George and Seng Li Peng; Writing by David Gaffen; Editing by Susan Fenton and Bernadette Baum)

 

Exclusive: At least $23 billion of property affected by Hurricane Harvey – Reuters analysis

A house is seen submerged by flood waters from Tropical Storm Harvey in Orange, Texas, U.S., August 30, 2017. REUTERS/Jonathan Bachman

By Ryan McNeill and Duff Wilson

(Reuters) – At least $23 billion worth of property has been affected by flooding from Hurricane Harvey just in parts of Texas’ Harris and Galveston counties, a Reuters analysis of satellite imagery and property data shows.

The number represents market value, not storm damage, and is but a small fraction of the storm’s reach, as satellite images of the flooding are incomplete. Satellite imagery compiled by researchers at the University of Colorado shows flooding across 234 square miles (600 sq km)of Harris County and 51 square miles (132 sq km) of Galveston County, about one-eighth of each county’s land area.

It is impossible to discern damage amounts from the data, as the satellite imagery does not reveal the depth of the floodwaters; nor does it reveal the impact of wind. But even this partial tally signals that the storm will rank among the most damaging in U.S. history.

Reuters overlaid the flood imagery on property parcel maps and found floodwaters had encroached on at least 30,000 properties in the two counties, with a total market value of $23.4 billion.

Of that, 26 percent is land value; the rest is buildings and other improvements. In Harris County, where Reuters was able to determine the property’s use, about 18 percent of the affected property is residential.

The tally omits much of Houston’s dense urban center because a satellite specializing in urban imagery has not yet taken enough images there. Floodwaters have inundated the area, like surrounding regions, and thousands of homes are damaged. Many roads, including vital highways and parkways, were submerged and businesses flooded and shuttered.

Ultimately, storm damage totals will come from estimates of insured and uninsured losses and disaster assistance payments, not from tallying property assessment values.

And real estate is only part of the equation in the rapidly rising toll as Harvey moves from Texas to Louisiana. Federal damage estimates will also include the vast cost of business interruptions, ruined vehicles and other personal possessions, repairs to roadways and other public infrastructure, and disaster aid like the money used to feed and house tens of thousands of displaced people.

Adam Smith, a lead scientist for the federal agency that compiles storm damage costs, said it is “very possible” Harvey’s costs may surpass the record $160 billion from Hurricane Katrina.

“But it will take some time to understand the magnitude of Harvey’s devastation, which is still unfolding,” Smith said in an email Wednesday to Reuters. “It is very unclear if Harvey’s costs will ultimately surpass Katrina. However, since this is an unprecedented extreme precipitation event over a major city, in addition to the damage to other cities (and) regions from wind, storm surge and flooding, it’s very possible.”

Hurricane Katrina in 2005 caused about $160 billion in damage, Hurricane Sandy in 2012 caused $70 billion, and Hurricane Ike in 2008 caused $34 billion, according to research by the National Oceanic and Atmospheric Administration. The damage figures are adjusted for inflation to 2017 dollars.

Harvey, a category 4 storm with 130 mph winds, came ashore Friday in Rockport, Texas. It churned slowly over the next five days, dropping about 50 inches of rain on Harris County, more than any tropical storm recorded in the continental U.S. since 1950.

Rob Moore, a senior policy analyst for water issues at the nonprofit Natural Resources Defense Council, said it’s “anybody’s guess” how much damage Harvey has wreaked.

“Because of the extent of flooding, a lot of insurance companies are expecting to see very high numbers of complete losses of residential properties,” said Moore, who monitors government and insurance industry reports. “And large proportions of those properties are going to be uninsured. A lot of people have dropped flood insurance policies the last few years.”

Homeowners who live outside the 100-year-flood hazard zone or don’t have mortgages are not required to buy flood insurance. Because there hasn’t been major flooding in Houston in 16 years, many homeowners have dropped coverage to save money.

Asked what would happen to them, Moore said, “They’re left in a situation nobody wants to be in. They’re not going to have very many options for repairing their homes. And a lot of forms of federal disaster assistance aren’t available if you don’t have flood insurance.”

Many of the neighbors who returned Wednesday to Oak Knoll Lane in Northeast Houston find themselves in that predicament. One of them, Valerie Stephens, 32, abandoned her house on Saturday, when about nine inches of water rushed into the house over half an hour. She has no flood insurance, and she said her house, valued at $79,000 on Zillow just before the storm, is worth “much less than that” now.

Up and down the street, water had topped mailboxes and left behind puddles of dirty water, a festering stink and a faint line of grime inside each house where the water had stagnated, usually a couple of feet off the floor.

That’s much less water than some areas have reported, but it was enough that residents began piling furniture on the curb and ripping open walls and floors to stop mold from creeping in and making the situation even worse.

Many did the same thing in 2001 after Tropical Storm Allison swamped the street.

“We’ve already pulled out the doors, the door frames. Then we’ll start with the sheetrock and the floors,” Stephens said. She expects to live with concrete floors and bare sheetrock while she finds the money to pay for all the damage.

(Reporting by Ryan McNeill and Duff Wilson in New York; Additional reporting by Peter Henderson and Ernest Scheyder in Houston; Editing by Janet Roberts and Marla Dickerson)

U.S. consumer confidence hits five-month high; house prices rise

A 'for sale' is seen outside a single family house in Garden City, New York, U.S., May 23, 2016. REUTERS/Shannon Stapleton/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S consumer confidence surged to a five-month high in August as households grew increasingly upbeat about the labor market while house prices rose further in June, suggesting a recent acceleration in consumer spending was likely to be sustained.

The data on Tuesday also supported views that economic growth would accelerate in the second half of the year after a sluggish performance earlier.

“Despite a daily dose of worrying headlines, consumers still have plenty to be confident about right now. Home prices are rising, stocks are just off record highs and the labor market is churning out jobs,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto. “That should continue to support solid consumer spending growth through the rest of the year.”

The Conference Board said its consumer confidence index increased to a reading of 122.9 this month from 120.0 in July. That was the strongest reading since March when the index hit a 16-year high of 124.9. August was also the second highest reading since 2000.

The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the best in 16 years.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report and is consistent with further absorption of labor market slack. The labor market is near full employment, with the unemployment rate at 4.3 percent.

Strong consumer confidence bodes well for consumer spending, which accelerated in the second quarter after slowing at the start of the year. It also provides a boost to the economy after it grew 1.9 percent in the first half of the year.

The dollar pared losses against a basket of currencies on the data. Prices for U.S. Treasuries were little changed after earlier rising on safe-haven buying after North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea. Stocks on Wall Street were marginally lower.

BULLISH CONSUMERS

Economists said bullish consumer optimism, together with the tightening labor market, were compelling reasons for the Federal Reserve to increase interest rates again this year despite worries about persistently low inflation.

“Consumers seem very confident in their ability to find a new job. They also are becoming more bullish on the outlook for stock prices even as the market holds near record highs,” said John Ryding, chief economist at RDQ Economics in New York.

“The Fed has put significant weight on consumer confidence in forming its views on the economy and, from that perspective, this report supports further rate increases.”

The U.S. central bank has raised rates twice this year. Economists expect the Fed will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September and hike rates in December.

The Conference Board survey showed consumers mildly upbeat about their short-term income prospects. The percentage of consumers expecting an improvement in their income rose slightly to 20.9 percent this month from 20.0 percent in July. The share expecting a drop fell to 7.8 percent from 9.5 percent in July.

Despite being near full employment, the labor market has struggled to generate strong wage growth, a frustration for both consumers and policymakers.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.7 percent in June on a year-over-year basis after a similar increase in May.

An acute shortage of homes on the market and strong demand are pushing up house prices. While rising house prices are boosting equity for homeowners, the dearth of properties is hurting home sales.

“Tight market conditions will drive house prices higher over the remainder of the year, although cautious appraisals and tougher mortgage lending regulations will act to prevent a dangerous house price boom,” said Matthew Pointon, an economist at Capital Economics in New York.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)