Oil prices reversed gains on Monday and retreated from three-week highs reached at the start of the session as Hurricane Ida hit the US Gulf coast and forced hundreds of offshore oil platforms to shut down and evacuate.
Brent, which rose more than 11% last week on anticipation of cuts in oil production due to Hurricane Ida, was down 16 cents, or 0.2%, to $72.54 a barrel as of 0654 GMT.
West Texas Intermediate (WTI) oil which jumped just over 10% in last week, fell 49 cents, or 0.7%, to $68.25 a barrel.
As Ida passed through Port Fourchon, Louisiana, a hub of the Gulf’s offshore energy industry, it reached levels not seen since early August, with Brent $73.69 and WTI $69.64, respectively, earlier in the session. Afterwards, crude prices eased in anticipation of a possible rapid recovery in oil production.
It is too early to know the true impact of Hurricane Ida. Petroleum products such as gasoline and diesel are likely to rise in price due to refinery cuts, especially if refineries and pipelines pose a challenge to recommissioning.
US gasoline prices rose more than 3% as power outages in the region added to refinery closures.
PBF Energy Inc’s 190,000 barrels per day (bpd) refinery in Chalmette, Louisiana, was shut down due to a power outage, according to sources. Marathon Petroleum Corp halted 578,000 bpd production in Garyville, Louisiana as the storm approached. Colonial Pipeline Co, the operator of the largest oil products pipeline in the United States, said it will temporarily halt fuel delivery from Houston to Greensboro, North Carolina.
The Louisiana Offshore Oil Port (LOOP), the largest privately owned crude oil terminal in the United States, halted deliveries before the hurricane.
LOOP is the only U.S. terminal able to unload supertankers, handling about 10% to 15% of U.S. domestic oil as well as 10% to 15% of its oil imports, and is connected to about half of the U.S. refining capacity.
On the production side, by Sunday, the U.S. had halted more than 95% of its Gulf of Mexico crude oil production, or 1.74 million barrels, when Ida turned to drilling rigs and other facilities, according to the Bureau of Safety and Environmental Enforcement.
The Gulf provides about 17% of the country’s oil. The offshore regulator said oil and gas companies have evacuated nearly 300 offshore facilities and removed more than 10 drilling vessels from danger.
Despite Ida, US drilling companies increased the number of oil and gas rigs last week, making August the thirteenth consecutive month that they increased their production facilities.
