Oil prices rise 3% as hurricane takes 675,000 bpd offline in Gulf of Mexico

Oil prices rose nearly three percent on Wednesday afternoon, boosted by fears of supply disruptions as Hurricane Francine makes its way through the Gulf of Mexico, where major operators have already halted some production and evacuated some staff.

The price increase comes despite the Energy Information Administration (EIA) inventory report out earlier in the day showing a rise in US inventories, initially causing oil to move lower before hurricane headlines claimed the trading day .

Fears are that this hurricane could lead to a longer production shutdown at a time when Libyan production is largely offline due to a dispute between rival governments.

At 2:15 pm ET on Wednesday, Brent crude was trading up 2.41% at $70.86 a barrel. The US benchmark West Texas Intermediate (WTI), had further gains, trading up 2.60% at $67.46 a barrel.

Meteorologists are expected Tropical Storm Francine to strengthen into a hurricane later today as it tracks northeast toward the Gulf Coast and becomes a looming threat to dozens of offshore oil and gas platforms and inland refineries.

The latest weather patterns wait for Francine to get stronger into a category two system tomorrow afternoon or evening and reach the Louisiana coast.

On monday, Chevron, Exxon Mobil and Shell announced that workers at offshore platforms in the path of the storm had been evacuated and drilling activities had been suspended.

According to a Reuters report on Tuesday, citing anonymous sources, Exxon planned to do so slash production at the 522,500 bpd facility at just 20% of capacity before Francine’s landfall.

The latest update at 14:11 from the US Bureau of Safety and Environmental Enforcement (BSEE), based on data from offshore operators at 11:30, is that 46% of the GOM’s 371 manned rigs were evacuated, while 60% personnel were evacuated from five platforms operating in the Gulf. Four other rigs moved from the location in a preemptive maneuver.

Almost 40% of the GOM’s oil production has been shut down and almost 50% of its natural gas production has been shut down.

By Tom Kool for Oilprice.com

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