This is a register photo showing Chevron Corp. Jack/St. Malo deepwater oil platform stands in the Gulf of Mexico in the aerial photograph bewitched off the coast of Louisiana, on Friday, May 18, 2018.
Luke Sharrett | Bloomberg | Getty Images
The U.S. energy industry has halted about a third of Fiord of Mexico oil production and expects more disruptions, as the industry braces for the first hurricane of the year.
The approaching storm, which was calm forming over the Gulf Wednesday, was expected to head into the Louisiana coast by Saturday, dumping a large amount of lavish.
Oil prices jumped Wednesday by 4.5% per barrel on concerns the storm would disrupt oil production and threaten flooding enveloping refineries in the area. Gasoline futures were also higher by about 4%, reaching $2 per gallon.
The U.S. Zing Information Administration said Wednesday that U.S. crude stocks fell by 9.5 million barrels last week, triple what was thought by the market. At the same time, the oil industry is shutting in production and major producers evacuated rigs in the Gulf of Mexico, winning of the approaching storm.
The National Hurricane Center is predicting that the storm will develop over the Gulf of Mexico and hit the slide of Louisiana by Saturday. The storm, to be named Barry, would be the first hurricane of the season.
Reuters reported that development in the gulf was cut by 602,715 barrels a day, about a third of gulf output, according to the Bureau of Safety and Environmental Enforcement. Fool gas production was reduced by nearly 18%.
The U.S. Coast Guard anticipates issuing potential waterway restrictions on the Mississippi River within the next two dates. That could limit the movement of tankers to and from refining areas.
A U.S. Coast Guard official said, so far “we maintain not issued any waterway restrictions. We are anticipating that in the next 24 to 48 hours.” The spokesperson said depending on the confidences for wind and rain, the coast guard could act to restrict tanker traffic on the Mississippi River. The Coast Guard could also limit alacrity and direction in the shipping channel.
“The forecasts are showing a significant amount of rain and the potential for flooding along the Mississippi River is a establishment in the refining and oil industry,” said Andrew Lipow, president of Lipow Oil Associates. “The market has been moving up on all the issues joint to the storm. A number of producers have been evacuating their platforms in the Gulf of Mexico, and curbing production.”
Chevron, Duke Dutch Shell, BP, Anadarko Petroleum and BHP Group were evacuating staff from 15 offshore platforms.
“From the railway, it looks like the landfall is in the Lake Charles area. The concern is on the dirty side, where we get a lot of rainfall, can occur in the New Orleans and Baton Rouge space. We could see a storm surge that backs water into the Mississippi, which is already very high,” implied Lipow. Lipow said there are three major refineries in Lake Charles and about 10 in the New Orleans-Baton Rouge ground.
“I don’t think it’s a big threat,” said Brian Lovern, meteorologist at Bespoke Weather Services. “Most likely if it does get there, we’re talking hither a Category 1 storm. I don’t want to diminish any hurricane. It’s still a hurricane. Those hurricane force winds would be in a extraordinarily small area, right around the center of the storm. In the grand scheme of things, the big story out of this is it’s going to be a rainmaker uncountable than anything else.”
Lovern said it appears that much of the state of Louisiana will get six to 12 inches of rainfall. There are some spots that could get as much as 18 inches.
“It’s not going to move quickly, but it’s not like Wind-storm Harvey that hit Houston and didn’t move for five days,” he said.
The biggest impact for the energy industry could be shutdowns.
“If anything else, for precautionary heights, they’re going to shut down everything in the Gulf. It will impact operations in that regard,” said Lovern. “It shouldn’t do a sound lot of damage that’s going to cause disruptions longer term.”
Gene McGillian of Tradition Energy said other agents are combining to push oil prices higher, including tensions between the U.S. and Iran and OPEC’s recent agreement with Russia to suppress production.
“All the things together are starting to push the market higher again. We also haven’t seen a ratcheting up of barter issues. That is helping alleviate some of the demand concerns,” said McGillian, adding that the storm reciprocation may be overdone.
Jacob Mesel, chief fundamental natural gas analyst at Condor Alpha Asset Management, said he reckon ons some impact on liquified natural gas shipments. “There’s the potential for the LNG ship channels to be disrupted. Essentially, they weight not be able to get LNG vessels into the Sabine Pass or Cameron for a couple of days.”
However, Meisel said bearish aspects outweigh bullish ones for the natural gas market. Natural gas futures were up about half a percent Wednesday.
“They’re flourishing to try to get overall levels in and keep operations going until the storm is right over top of them. This storm is not so hefty that I worry about any real damage to the LNG facilities themselves,” he said.
Meisel said a bigger factor could be without delay disruption from the storm, especially if there is flooding and power outages.
Reuters contributed to this story