Gulf refineries, oil output shut for storm: Update 2

Updates BSEE figures, adds details on refinery shut-ins, futures prices.

The US Gulf coast from the Houston, Texas, area to Morgan City, Louisiana, is under a hurricane watch with a powerful storm expected to make landfall tomorrow.

Hurricane Laura entered the Gulf of Mexico late yesterday after passing over Cuba. The National Hurricane Center has it tracking for landfall somewhere between Galveston Bay in Texas and near the Texas-Louisiana border.

Coastal counties home to some of the largest US refineries and petrochemical plants have started to issue mandatory evacuation orders, including Jefferson County, Texas, home to more than 1mn b/d in refining capacity. The island city of Galveston, Texas, 50 miles (80km) from Houston and at the mouth of the waterway leading to the Houston Ship Channel, also issued mandatory evacuation orders today.

About 84pc of US offshore oil production, or 1.6mn b/d, was shut in, the Bureau of Safety and Environmental Enforcement (BSEE) said today, while 61pc of offshore natural gas production, or 1.65 Bcf/d, was offline. Personnel have been removed from 299 producing platforms, or nearly 47pc of the manned platforms in the region, BSEE said.

WTI Nymex crude futures have seen an uptick amid the storm threat rising by about $1/bl this week. October WTI futures settled at $43.35/bl today, a five-month high for a prompt-month contract.

Refineries close ahead of landfall

Refineries started shutting down operations ahead of the storm this week, including Phillips 66's 260,000 b/d refinery and Citgo's 425,000 b/d refinery — both in Lake Charles, Louisiana.

Motiva also started shutting its 600,000 b/d refinery in Port Arthur, Texas, yesterday, the company said in a filing to state environmental regulators. Total is also idling its 240,000 b/d Port Arthur refinery, and ExxonMobil reduced rates at its 362,000 b/d refinery in Beaumont, Texas, following the mandatory evacuation order from Jefferson County.

The Louisiana Offshore Oil Port (LOOP) off the coast from Grand Isle, Louisiana, has suspended operations at its marine terminal. LOOP is a major US crude export terminal.

Ports in the New Orleans, Louisiana, region were set to condition Zulu, which means the ports are closed and all vessel movements require approval from the port's captain.

Port Arthur was set to condition x-ray, but remained open to all traffic, according to the Coast Guard.

Inbound traffic into the Houston Ship Channel was suspended yesterday at 5pm ET.

Tropical storm activity has had a more muted effect on US oil and natural gas prices in the past decade because so much domestic output now comes from onshore shale fields.

In addition, US Gulf coast refineries were already processing 17pc less crude ahead of the storm to balance lower demand and swollen stockpiles of diesel and jet fuel resulting from efforts to contain the Covid-19 pandemic. Implied US gasoline demand was 10pc lower than year-ago levels in mid-August, and diesel demand lower by 13pc, according to the latest federal data.

By Eunice Bridges and Tom Fowler