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The Port of New Orleans has been closed to incoming traffic and Phillips 66 is shutting its Alliance refinery as Louisiana prepares to weather the hit from Tropical Storm Barry.
Phillips 66 spokesman Dennis Nuss said Thursday non-essential personnel have been released from work at the 253,600 b/d refinery in Belle Chasse, Louisiana, and "a full shutdown" of the refinery will be completed by early Friday morning.
The US National Hurricane Center upgraded the storm to Tropical Storm Barry on Thursday morning. A tropical storm warning and hurricane watch are in effect for much of the Louisiana coast, and the NHC said additional watches and warnings could follow later Thursday.
Other USGC refiners are keeping an eye on the storm but have not shut down refineries.
Factbox: More oil, gas production halted, one refinery shuts, as US Gulf Coast prepares for Tropical Storm Barry
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ExxonMobil said its USGC refineries were operating normally but is keeping an eye on the weather.
Chevron said it was following its storm procedure plans at its two regional refineries: the 330,000 b/d Pascagoula, Mississippi, plant and the 112,229 b/d Pasadena, Texas, plant newly acquired from Petrobras.
The company said its Fourchon and Empire terminals are still operating, but Chevron Pipe Line has "shut down, secured and evacuated" the Whitecap Ship Shoal 208 platform.
US Gulf Coast gasoline prices were strengthening in reaction to the storm. Benchmark cash USGC gasoline was trading at the NYMEX August RBOB futures contract minus 11.25 cents/gal Thursday morning, compared with a Wednesday assessment of minus 13.25 cents/gal, and finished the day assessed at 12.05 cents/gal.
NYMEX refined product futures finished the session on the back foot after exploring positive territory earlier in the day, with August ULSD settling 1.24 cents lower at $1.9786/gal and August RBOB off 1.57 cents at $1.9895/gal at market close. This came after NYMEX August WTI settled down 23 cents at $60.20/b, and ICE September Brent was 49 cents lower at $66.52/b.
The Port of New Orleans late Thursday was set at Port Condition Yankee, closing it to incoming traffic as gale-force winds were expected within 24 hours.
Lake Charles was set at Port Condition X-Ray but was expected to go to Port Condition Yankee later Thursday. Port Condition X-ray means gale-force winds are expected within 48 hours but the port remains open to commercial and recreation traffic.
A spokeswoman for the Louisiana Department of Environmental Quality said the Stolthaven terminal in New Orleans had shut down. The facility has 85 tanks.
US offshore drillers had shut 1 million b/d, or 53%, of Gulf of Mexico oil production and 1.2 Bcf/d, or 45%, of natural gas output as of Thursday morning, according to the US Department of the Interior's Bureau of Safety and Environmental Enforcement, based on company surveys.
Chevron, Anadarko and BP on Wednesday started shuttering US Gulf of Mexico production and evacuating staff from drilling and production platforms, while Shell evacuated nonessential staff but continued with reduced production.
BSEE said 191 platforms and seven non-dynamically positioned rigs have been evacuated, and 11 dynamically positioned rigs have been moved off site.
Barry could cut Gulf of Mexico crude production by 140,000 b/d-230,000 b/d in July, according to S&P Global Platts Analytics estimates.
Chevron shut production at its Big Foot, Blind Faith, Genesis, Petronius and Tahiti platforms but will continue production at the Jack St. Malo deepwater project.
Anadarko shut production at its Constitution, Heidelberg, Holstein and Marco Polo platforms in the central Gulf of Mexico and removed all staff from the facilities. The driller also removed nonessential staff from its eastern Gulf of Mexico facilities.
BP started removing staff and shutting production at BP-operated platforms "across the Gulf," without giving further details. Sources said Thunder Horse, Atlantic, Mad Dog and Na Kika were impacted.
Shell has slowed production at its Olympus project by 1,835 b/d and at its Mars project by 700 b/d. It also cut production at Appomattox.
ExxonMobil said it evacuated nonessential staff from three platforms in the Gulf of Mexico, including Lena, which is undergoing decommissioning, and is prepared to transfer remaining personnel if necessary. A company spokeswoman said there was minimal impact to ExxonMobil operated production.
Day-ahead on-peak power prices in the path of the storm weakened Thursday, likely in reaction to a milder temperature forecast, as the Midcontinent Independent System Operator declared a severe weather alert for the weekend.
On Intercontinental Exchange, MISO's Louisiana Hub day-ahead on-peak contract was bid on Wednesday at $35/MWh and offered at $65/MWh for delivery Thursday, when the heat index was expected to hit 110 degrees Fahrenheit.
But on Thursday, Louisiana Hub on-peak was bid at $30/MWh and offered at $40/MWh for delivery on Friday, when New Orleans highs were forecast to be in the upper 80s, 4 F below normal, according to CustomWeather.
S&P Global Platts Analytics has estimated that natural gas power burn demand dropped 0.6 Bcf/d from Tuesday to Thursday in the Southeast, and has forecast power burn demand to be down about 0.7 Bcf/d over the next week "with substantial downside risk should severe weather ... weaken electric loads."
MISO's declaration Thursday morning of a severe weather alert covers the period from midnight Friday through midnight Monday.
The alert includes a request for deferral or cancellation of maintenance and testing of any critical transmission or generation systems in the area of Louisiana and Mississippi primarily served by utilities owned or operated by Entergy and Cleco, plus nearby public power utilities and electric cooperatives.
According to a MISO emergency operations document, non-critical maintenance of equipment is suspended "and in some cases, returned to service" when a conservative system operations status is declared.
S&P Global Platts Analytics warned of a "substantial downside risk should severe weather damage power lines and other electric related infrastructure that may weaken electric loads across the Southeast and East Texas," which could also impact refinery operations if power is lost.
NATURAL GAS PRICES
Natural gas cash prices in the southeast and east Texas varied Thursday, as Tropical Storm Barry continued to gain momentum in the Gulf of Mexico.
In East Texas, Houston Ship Channel settled 0.5 cents lower at $2.435/MMBtu; Carthage Hub settled 6.5 cents higher at $2.375/MMBtu; and Transco Zone 2 settled 1.5 cents lower at $2.425/MMBtu.
In the Southeast, Henry Hub settled 2 cents higher at $2.475/MMBtu.
Although the impact to supply and demand that potential Tropical Storm Barry might cause remains unknown, near-term decreases in regional supply and demand can be expected. S&P Global Platts Analytics anticipates offshore production to fall 494 MMcf to 1.6 Bcf on Thursday. Onshore production is also expected to falter, falling 453 MMcf to 29.9 Bcf.
Platts Analytics forecast total regional demand to decrease to 37.2 Bcf Thursday, an 868 MMcf decline from Wednesday levels. Most of the demand decline is anticipated to come from reduced power generation demand, as the heavy rains from the storm system bring cooler weather.
LNG SHIPPING IMPACT
The biggest impact to operational Gulf Coast LNG export terminals could come from vessel traffic restrictions along the intracoastal waterways that serve the terminals.
In coordination with the US Coast Guard, Sabine Pilots suspended inbound tanker transits along the intracoastal waterway that serves Cheniere Energy's Sabine Pass terminal on Wednesday evening, an advisory issued by Moran Shipping said.
A pilots dispatcher said Thursday afternoon that pilots services were no longer suspended and they were taking inbound vessels, but that Cheniere was not taking in any vessels to its facility at that time as it continued to monitor port conditions provided by the Coast Guard.
Officials with the Coast Guard's Vessel Traffic Service in Port Arthur, Texas, just across the state line from the Sabine Pass terminal, said most parties taking precautions were expected to resume inbound transits once the storm track solidified.
LNG production appeared to be continuing at the LNG terminals along the Gulf Coast.
Offshore, total gas production is expected to fall 1.4 Bcf/d on Thursday compared with the prior 30-day average of about 3 Bcf/d, Platts Analytics data showed. The majority of this decline has been driven by reduced production in the Louisiana offshore area since the start of the week.
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