Explosions at a Texas refinery – What does the Port Arthur fire mean for the market?

The fire broke out at a refinery owned by Valero, one of the local heavyweights in the hydrocarbons market. A few months ago, the company signed an agreement with Chevron regarding the processing of Venezuelan crude oil.

According to available information, the source of the fire was a diesel hydroprocessing unit. The blaze has been brought under control, but smoke is still hanging over the site. The Valero facility accounts for nearly 2% of total U.S. refining capacity. Importantly, based on the latest crude inventory reports, the biggest shortages in the supply chain are occurring on the refining side rather than in crude itself.Notably, the refinery is one of the key producers of, among other things, jet fuel. This is currently the most scarce type of fuel due to the conflict in the Persian Gulf. At present, nothing indicates that the refinery’s overall output has been reduced in a way that would be significant for the market or the economy.

It is worth remembering, however, that Iranian officials had warned Donald Trump of possible “surprises” and price increases. There is currently no evidence of this, but it is not an unfounded suspicion that this incident may not have been an accident, and that it may not be the only event of this kind we will see in the coming weeks.