Oil prices rise as storms bear down on Gulf of Mexico

More than half of the Gulf of Mexico’s US offshore production is shut as region braces for two storms.

Tropical Storm Marco arrives at the coast of Louisiana as Tropical Storm Laura follows, bottom right, in an image from the National Oceanic and Atmospheric Administration (NOAA) GOES-East satellite August 24, 2020 [File: CIRA/NOAA/Handout via Reuters]
Tropical Storm Marco arrives at the coast of Louisiana as Tropical Storm Laura follows, bottom right, in an image from the National Oceanic and Atmospheric Administration (NOAA) GOES-East satellite August 24, 2020 [File: CIRA/NOAA/Handout via Reuters]

Oil prices rose on Monday as storms headed for the Gulf of Mexico shut more than half of the region’s offshore production, with the more dangerous of the two storms expected to strike later in the week.

Brent crude settled at $45.13 a barrel, gaining 78 cents, or 1.76 percent, while United States West Texas Intermediate crude settled at $42.62 a barrel, rising 28 cents, or 0.66 percent.

Energy companies shut more than 1 million barrels per day (bpd) of offshore crude oil supply in the US Gulf of Mexico and evacuated more than 100 production platforms because of the twin threat from Tropical Storms Marco and Laura.

Marco reached the coast Monday, and Laura was expected to accelerate to a hurricane and hit by midweek.

US petrol futures jumped roughly 7 percent as refiners idled plants as a precaution.

“As is often the case within the energy complex, developments that are bullish to the products can be bearish to the crude futures as crude demand from the refiners is curtailed,” said Jim Ritterbusch of Ritterbusch and Associates.

The storms could also curtail US exports. Brent’s gains outpaced US crude on expectations that other countries might be able to boost exports while Gulf facilities are shut.

“Because the US is a major exporter, some of the supplies that we normally would be exporting are going to be stuck in the harbour,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “That’s going to offset what we’re losing in production.”

Motiva Enterprises began preparations to shut its Port Arthur, Texas, crude refinery, the country’s largest, sources told Reuters News Agency.

Total SA also cut production to minimum at its 225,500 bpd Port Arthur refinery and was preparing for a possible shutdown.

Also supporting oil prices was a Financial Times report that US President Donald Trump is considering fast-tracking an experimental COVID-19 vaccine being developed by AstraZeneca and Oxford University.

AstraZeneca denied having discussed an emergency use authorisation for its potential vaccine with the US government and called speculation of such use “premature”.

Source : Reuters

More from Economy
Most Read