Oil prices rise 2% as Gulf Coast producers battle tropical storm

Oil prices rose 2% Thursday morning as Tropical Storm Francine made landfall on the Louisiana coast.

Earlier in the week, media reported that Gulf field operators were evacuating crews from offshore platforms ahead of the storm. Chevron, Shell and Exxon were among the companies that halted work on some rigs in anticipation of the storm.

Woodside Energy closed an offshore oil rig in the Gulf of Mexico before Francine’s landfall.

On Tuesday, Reuters reported that Exxon plans to cut output at the 522,500 bpd unit to just 20 percent of capacity before Francine makes landfall. “We are closely monitoring and preparing for severe weather that could affect our operations in Baton Rouge,” an Exxon spokesman told Reuters. “Our primary focus is the safety of our workforce and communities in the affected areas. We continue to honor our customer commitments.”

A total of six Louisiana refineries reduced operating rates ahead of the storm, operating with minimal staffing until Francine made landfall.

Louisiana’s Port Fouchon, which handles, among other things, the supply of equipment to offshore platforms, was closed ahead of Francine’s landfall, as was Louisiana’s offshore oil port, Reuters reported late wednesday Five other ports in Louisiana also remained closed, including New Orleans, Plaquemines, Cameron, Lake Charles and Houma.

According to an analyst at East Daley Analytics, the hurricane’s impact on oil and gas production in the area could extend for up to two weeks, Reuters reported before Francine made landfall. Since it made landfall as a Category 2 storm, there’s a chance the impact won’t last that long, even though Louisiana’s governor has declared a state of emergency.

The immediate impact on prices was somewhat muted, however, according to MarketWatch RECORDED in a report, quoting a portfolio manager at SIA Wealth Management as saying “traders are more concerned that falling demand could lead to oversupply in the market.”

“In this case, supply cuts don’t matter as much as they do during periods of high demand.” Colin Cieszynski also said.

By Michael Kern for Oilprice.com

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