U.S. oil and gas production is expected to be disrupted once again as Tropical Storm Nate heads to the northern Gulf coast this weekend, becoming a hurricane threat from Louisiana to western Florida’s Panhandle.
Offshore oil and gas operators have started to shut-in production and evacuate platforms in the Gulf of Mexico in preparation for the storm. Gulf crude production fell 14.6% by 256,607 barrels per day (BPD) on Thursday, while gas output was down 206.71 million cubic feet per day (MMcf/d), or 6.42%, Kallanish Energy learns.
The estimates were released on Oct. 5 by the Bureau of Safety and Environmental Enforcement (BSEE), based on reports of six operators. The agency said six manned platforms had been evacuated out of the 737 operating. It will release daily updates on operations.
Nate has killed 22 people in Central America and is heading for the U.S. less than two months from devastating Hurricane Harvey, which shut-down a quarter of the country’s refinery capacity. Offshore rigs and platforms in the Gulf of Mexico account for 17% of the U.S. oil output and 4% of gas. Roughly 45% of crude refining capacity and 51% of gas processing is on the coast.
BP, Chevron are shutting production at all Gulf platforms, while Shell and Anadarko Petroleum suspended some production and drilling activity in the Gulf. Statoil, ExxonMobil and other producers have evacuated personnel from platforms. Marathon Oil and ConocoPhillips are said to be monitoring Nate’s path prior to taking any action.
Sources told Reuters Shell was reducing output on Thursday at its 255,800-BPD Norco refinery and Phillips 66 was mulling the temporary shutdown of the 247,000-BPD Alliance refinery or placing it on standby.
Hurricane Harvey slowed U.S. refineries’ intake of domestic oil causing supplies to build up and prices to fall. On Friday, U.S.’s benchmark West Texas Intermediate (WTI) for November delivery was trading at $50.60 a barrel, while Brent crude for December contract was trading at $57.06/Bbl.
The disruption caused at the Gulf coast in September widened the Brent-WTI spread to record-high levels, and drove U.S. oil exports to a new high of nearly 2 MMBPD last week.
“This is classic Oil Markets 101: too much crude in the US and too little crude elsewhere means that US prices weaken relative to global prices, and exports increase to address the imbalance,” Société Générale said in a note.