Hurricane Laura, classified as a Category 4 storm, hit southern Louisiana early Thursday. It is considered as one of the most tumultuous to strike the Gulf Coast in decades.
Property damage and hazardous chemical fire are a few of Laura’s aftermaths. It spared most U.S. oil infrastructures, such as the Gulf Coast infrastructure, in Louisiana and Texas. As a result, oil prices declined.
“We haven’t seen as big a surge in oil prices as we may have otherwise seen, but this isn’t exactly an undersupplied market.”
Craig Erlam, senior market analyst at Oanda
Because of employees’ evacuation, around 1.6 million barrels per day of crude oil, amounting to 84% of U.S. offshore oil production, has been discontinued. “Producers have halted about 1.65 billion cubic feet per day of natural gas production from the Gulf of Mexico,” according to a news report.
Amid the uncertainty in supply and demand brought by the storm’s aftermath, a 5-week straight decline in crude inventories offers little to no support in prices. Moreover, production cannot start until employees come back to work.
Phil Flynn, a senior market analyst at The Price Futures Group, expressed a concern that the oil industry may counter the earnings they have seen in demand because of the hurricane track, with the possibility of brownout and a decline in the number of people driving.
“Hurricane Laura packed a wallop… The strongest hurricane in 168 years and already there are signs that the U.S. Energy Industry is trying to make strides to get back to normal, yet we are just starting to assess the damage.”
To fully assess the storm’s impact on oil and gas industries, analysts warily oversee flooding in the area. A severe problem with flooding of the Colonial Pump line stations “would mean gasoline produced in Houston could not make its way to the East Coast markets,” according to Andrew Lipow, president of the Houston-based consulting firm Lipow Oil Associates, as cited in a news report.
Refinery areas of Beaumont and Lake Charles, which were covered ahead of the storm, constitute 13% of U.S. yield, or approximately 2.5 million barrels per day. Refineries utilize unrefined oil to form gasoline and other items.
The crude oil producer, which closed 84% of Gulf of Mexico oil yield, will likely to restart operations on Thursday. Since utilization was at 80% due to the requested setback caused by the COVID-19 widespread, refineries saved by the storm can offer assistance to make up for lost yield somewhere else within the locale.