Oil prices pared early gains on Monday, falling back from more than three-week highs reached earlier in the session, as a powerful hurricane slammed into the U.S. Gulf coast, forcing shutdowns and evacuations of hundreds of offshore oil platforms.
Brent was up 5 cents or 0.4% at $72.75 a barrel by 0559 GMT. It rose more than 11% last week in anticipation of disruptions to oil production from Ida.
U.S. oil turned negative and was down by 31 cents or 0.5% at $68.43 a barrel, having jumped a little over 10% over last week.
The benchmarks hit highs not seen since early August, $73.69 and $69.64, respectively, earlier in the session, as Ida slammed into the coast near Port Fourchon, Louisiana, a hub of the Gulf’s offshore energy industry.
“It’s still early days to know the full impact of Hurricane Ida,” said Vivek Dhar, commodities analyst at Commonweath Bank of Australia.
“Oil products, like gasoline and diesel, are likely to see prices rise more acutely from refinery outages, especially if there are difficulties in bringing refineries and pipelines back online,” Dhar said.
U.S. gasoline prices rose more than 3% at one point as power outages added to refinery closures on the Gulf coast and the focus switched to crude products. Crude prices also eased in anticipation of a likely quick recovery in oil production, analysts said.
PBF Energy Inc’s (PBF.N) 190,000 barrel-per-day (bpd) refinery in Chalmette, Louisiana, has been shut down by a power outage caused by Ida, sources told Reuters.
Marathon Petroleum Corp (MPC.N) shut its 578,000 bpd in Garyville, Louisiana, as the storm approached.
Colonial Pipeline Co (COLPI.UL), operator of the largest petroleum products pipeline in the United States, said on Sunday it would temporarily halt fuel deliveries from Houston to Greensboro, North Carolina, due to Ida.
HIT TO PRODUCTION
On the production side, energy companies had halted more than 95% of crude output, or 1.74 million bpd’s worth, in the U.S. Gulf of Mexico by Sunday, according to the Bureau of Safety and Environmental Enforcement, as Ida headed toward drilling rigs and other infrastructure.
The Gulf supplies about 17% of the nation’s oil.
Oil and gas companies had evacuated around 300 offshore facilities and moved more than 10 drill vessels out of harm’s way, the offshore regulator said.
Louisiana Offshore Oil Port (LOOP), the biggest privately owned crude terminal in the United States, halted deliveries before the hurricane.
LOOP is the only U.S. terminal able to unload supertankers, handling about 10% to 15% of U.S. domestic oil as well as 10% to 15% of its oil imports, and is connected to about half of the U.S. refining capacity, Port Fourchon said on its website.
Ida smashed into the coast near Port Fourchon at 1655 GMT on Sunday as an extremely dangerous Category 4 hurricane, the National Hurricane Center said, before starting to weaken.
“Hurricane Ida will dictate oil’s near-term direction,” said Jeffrey Halley, senior market analyst at OANDA. “If Ida weakens and its path of destruction is lower than expected, oil’s rally will temporarily lose momentum here.”
Despite the approach of Ida, U.S. drilling companies increased the number of oil and gas rigs last week, making August the thirteenth consecutive month they have added production facilities.