Gasoline futures rose sharply on Monday as oil prices retreated, a day after Hurricane Ida made landfall in Louisiana, shutting down refineries on the Gulf Coast as it also shut down most of the region’s offshore oil and natural gas production.
“Hurricane Ida has been bad for gasoline production as the shutdowns accounted for 13% of refining capacity, which could be shut down for up to a week if there are extensive flooding and power outages,” said Jay Hatfield, chief executive and portfolio manager at Infrastructure Capital. Advisors, in comments by email.
A short-term spike in gasoline prices would likely result from the storm, he said.
Read: Hurricane Ida sweeps through Louisiana and Mississippi
Petrol for delivery October RB00,
rose 3.16 cents, or 1.5%, to $2.1512 a gallon on the New York Mercantile Exchange after trading as low as $2.21, according to FactSet.
West Texas Intermediate Crude Oil For October Delivery CL00,
fell 27 cents, or 0.4%, to $68.47 a barrel on the New York Mercantile Exchange. October Brent raw BRNV21,
the global benchmark, fell 3 cents to $72.67 a barrel on ICE Futures Europe, while the most actively traded contract, November BRN00,
rose 5 cents, or 0.1%, to $71.75 a barrel.
Analysts at S&P Global Platts Analytics said nearly 4.4 million barrels per day of operational refinery capacity was in Ida’s path, largely in Louisiana, with at least half of which went offline before the storm turned into a windfall.
Colonial Pipeline, which forms the main artery for transporting fuel from Houston to the South and East Coast, on Sunday shut down two lines supplying supplies from Houston to Greensboro, North Carolina.
The company said fuel supplies in the Southeast will remain available from terminals along the supply route, while lines serving northeast from Greensboro to Linden, New Jersey, will continue to operate normally. The company said it expects to fully resume operations after assessing infrastructure damage.
Meanwhile, the Bureau of Safety and Environmental Enforcement reported on Sunday that 95.65% of the Gulf Coast’s crude oil production, or 1.741 million barrels per day, was shut down, as well as 93.75% of the region’s natural gas production.
See: Nearly 95% of Gulf Coast oil and gas production offline as Hurricane Ida ravages Louisiana
“The big question is, which will yield faster returns – offshore oil production or refining capacity?” said Warren Patterson, head of commodities strategy at ING.
“If it is the former, we could see a build-up of crude oil inventories, which would not be a constructive signal for oil prices, although it would likely contribute to cracks in refined products,” he said. The crack spread is the difference between the price of a barrel of crude oil and the products refined from it.
Natural gas futures sharpen lower, with the October contract NG00,
down 2.1 cents, or 0.5%, to $4,367 per million British thermal units.
Traders also looked forward to a meeting this week between the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+. The producers previously agreed, following a standoff between Saudi Arabia and the United Arab Emirates, to begin increasing production in increments of 400,000 barrels per day from this month until existing production restrictions are fully lifted.
Goods angle: To pause or not to pause oil production surge is the question OPEC+ will face when it meets this Wednesday
The Biden administration earlier this month called on OPEC+ to further ramp up production, but analysts said a response seems unlikely.
“We do not foresee any fireworks from the group following the more recent price recovery. And we expect them to continue easing their supply restrictions as planned,” Patterson said.