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Crude climbs as tropical cyclone bears down on US Gulf Coast

Highlights

Landfall expected in Louisiana early June 19

Chevron shuts in two offshore platforms, evacuates staff

LNG facilities likely unaffected

Oil futures settled higher June 18 as eastern US Gulf producers and refiners braced for potential disruptions caused by a tropical storm forecast to hit the area this weekend.

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NYMEX July WTI settled 60 cents higher at $71.64/b and ICE August Brent climbed 43 cents to $73.51/b.

Potential Tropical Cyclone Three is forecast to make landfall as a tropical storm along the Louisiana coast in the early morning hours of June 19, according to the US National Hurricane Center. Tropical storm conditions are expected to begin later June 18 in the area from Morgan City, LA to the Okaloosa/Walton County line, Florida, NHC said.

NYMEX July RBOB climbed 3.41 cents to $2.1683/gal and July ULSD settled up 2.64 cents at $2.0932/gal.

The system is expected to produce heavy rain and flooding in these areas, potentially threatening a refiners and other energy infrastructure.

Louisiana is home to an aggregate 3.367 million b/d of refinery capacity, comprising 17.7% of total US capacity, according to US Energy Information Administration data.

Chevron temporarily shut in production June 18 at its Jack/ St. Malo and Tahiti platforms and evacuated non-essential personnel from the Big Foot, Jack/ St. Malo and Tahiti platforms. All personnel from its Genesis facility were also moved onshore, spokesman Tyler Kruzich said in an email responding to questions.

Output at Jack/ St. Malo and Tahiti, which produce a combined 96,000 b/d of oil and 26 MMcf/d of gas, was expected to return to full levels over the weekend, spokesman Tyler Kruzich said in an email responding to questions.

Other producers in the Gulf, including BP, Shell and W&T Offshore, said they were monitoring the track of the storm but as of early afternoon had not yet evacuated any staff from platforms or shut in any offshore output.

W&T Offshore also had not yet shut in any of its pipelines that flow operated production, spokesman Al Petrie said in an e-mail responding to questions.

Louisiana refiners in the path of the storm were also monitoring the situation.

"Phillips 66 is closely monitoring Potential Tropical Cyclone Three in the Gulf of Mexico," said spokesperson Allison Stowe. "Based on the storm's projected path, our Alliance Refinery in Belle Chasse, Louisiana, has activated its storm preparedness plan and remains focused on maintaining safe and reliable operations. There's no impact to operations at this time."

Platts assessed USGC unleaded 87 gasoline at a 7.75 cents/gal discount to NYMEX RBOB June 18, in from 8.5 cents/gal on June 17. But Platts USGC ULSD was assessed at a 5.25 cents/gal discount to NYMEX ULSD, steady from the session prior and still the lowest since mid-February.

With the storm tracking well east of gas liquefaction facilities in southwest Louisiana and southeast Texas, producers there did not expect any impacts to export operations. Officials at Cheniere Energy, the biggest US LNG exporter with facilities at Sabine Pass in Louisiana and Corpus Christi in Texas, and Freeport LNG, which operates a liquefaction facility south of Houston, said they would continue to monitor the storm.

Front-month July Henry Hub natural gas futures settled 38 cents lower at $3.215/MMBtu June 18.

Oil undaunted by rising dollar

The higher oil price settle came despite a continued rally in the US dollar. The ICE US Dollar Index climbed to 92.213 in afternoon trading, up from 91.889 on June 17 and on pace for the highest close since April 7.

The dollar has moved steadily higher since a June 16 Federal Reserve Open Market Committee meeting, where officials struck a more hawkish economic tone and projected interest rate hikes coming in 2023. A nearly 2% selloff in crude prices seen June 17 was attributed by analysts to a steep rise in the dollar.

The value of the dollar and that of dollar-denominated commodities, including oil, are typically inversely correlated.