While oil producers in the Gulf of Mexico had been holding in about 1.7 million barrels of crude per day prior to the storm, refineries in the US state of Louisiana are likely to resume operations more slowly.
Oil surged higher in New York as offshore explorers assess damage from Hurricane Ida and as investors turn their attention to an OPEC+ meeting where more supply could be added to the market.
New York futures were trading just over $69 a barrel, having previously fallen 1.6%. While producers in the Gulf of Mexico had brought in about 1.7 million barrels of crude per day prior to the storm, Louisiana refineries may be slower to resume operations.
“The market considers Ida’s impact on crude production to be minimal at this point, as opposed to refining,” said Bart Melek, head of global commodities strategy at TD Securities. “This means less demand for feed as refineries have reduced capacity, which could ease concerns about crude oil scarcity.”
Petrol futures were up more than 4% earlier in the session before their advance slowed. About 2.11 million barrels per day of refining capacity — about 12% of the total in the US — was closed on Sunday or cut to reduced rates at plants along the Mississippi River.
Both crude oil and gasoline were hit by volatile trading this month as investors weighed in on the consumption challenge posed by the rebounding pandemic in parts of Asia, the US and Europe. Meanwhile, the Organization of the Petroleum Exporting Countries and its partners are set to meet later this week and are expected to continue to ramp up production.
Hurricane Ida ravaged New Orleans and the Louisiana coast overnight with torrential rain and gusty winds, leaving much of the region without electricity and bracing for widespread flooding. The storm drove a wall of water inland when it thundered ashore as a Category 4 hurricane on Sunday, reversing the course of part of the Mississippi River.
After Ida crossed the Gulf, a US Coast Guard flyover on Sunday afternoon showed that the Royal Dutch Shell Plc-operated Mars, Olympus and Ursa crude and natural gas platforms remained on site.
“We expect oil production to return faster than refining production in the region,” Goldman Sachs Group Inc analysts wrote. in a note Monday. It is too early to determine how long refineries in the region will remain closed, they said.
Gasoline prices in the southeastern US could soar in the coming weeks if refineries suffer major damage or are unable to receive power and are forced to remain closed for extended periods, further hurting Americans.
Houston physical gasoline spot prices rose to nearly a four-year premium over New York futures.
Traders in Europe have already prepared to fill any supply gaps in the Port of New York by provisionally chartering tankers.
West Texas Intermediate crude for October delivery rose 50 cents to $69.24 a barrel at 1:34. hours in New York.
Brent oil before the October settlement climbed 59 cents to $73.29 a barrel on ICE.
WTI fell to $4.09 a barrel below its global benchmark Brent, its biggest discount since May 2020.
The September gasoline contract, expiring Tuesday, gained 1.7% to $2,3129 a gallon
Gasoline prices in October rose 1.5% to $2.1513 a gallon.
Colonial Pipeline Co., the operator of the largest US fuel distribution system from its Texas and Louisiana refineries to customers in the eastern US, shut down its main network.
“For a Category 4, you could be looking at four to six weeks or more of downtime for the refineries,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Landing about 60 miles south of New Orleans, Ida pushed ocean levels up to 4.9 meters. The hurricane’s 250-mph winds match Laura’s 2020 record and a 19th-century storm.
Port of New Orleans remains closed to all shipping traffic as ship pilots report damage to Valero Meraux refinery dock
Crescent Pilots reports damage to the Valero, Meraux dock
Oil and natural gas explorers at the refineries in the Gulf of Mexico and Louisiana shut down production when Hurricane Ida made landfall.
US motorists expecting end-of-summer relief for gasoline prices should brace themselves for higher costs.
The head of the Libyan National Oil Corp. has been suspended pending an investigation into whether he has violated the policy, the oil minister said.