New York — Crude prices surged nearly 3% Sept. 15 as Gulf of Mexico operators shut in more than a quarter of offshore production ahead of Hurricane Sally.
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NYMEX October WTI settled $1.02 higher at $38.28/b and ICE November Brent was up 92 cents on the day at $40.53/b.
US Gulf of Mexico producers have shut in roughly 27% of offshore oil and natural gas output ahead of the landfall of Hurricane Sally, which was slowly heading towards the Alabama coast Sept. 15, according to the US Bureau of Safety and Environmental Enforcement. At least 497,072 b/d of crude production, representing 26.87% of total offshore US Gulf output, was offline as of midday Sept. 15, BSEE data showed.
"The market was focused more so on the Gulf Coast storms," OANDA senior market analyst Edward Moya said. "There is going to be another period of disruptions to production in that region, and that put a damper on pickup in production we saw in the last week."
RBOB futures were also up around 3% as the storm shut in some regional refining capacity.
NYMEX October RBOB climbed 3.13 cents on the day to settle at $1.1381/gal while October ULSD edged up just 59 points to settle at $1.0993/gal.
Phillips 66's 255,600 b/d Alliance refinery in Belle Chasse, Louisiana, remains shut in advance of Sally, although an eastward track in the storm's path means that that region is no longer expected to feel much of an impact.
Other refineries more directly in the storm's path were operating normally. Chevron spokesman Sean Comey said the company's 356,400 b/d Pascagoula Refinery in Mississippi is still operating, and Shell said its Mobile refinery in Alabama plans to continue operating during Sally. However, only essential personnel will remain on-site.
The Alliance shut down means that close to 1 million b/d of crude refining capacity currently offline in Louisiana, as Phillip's 66's 260,000 b/d and Citgo Petroleum's 418,000 Lake Charles refineries remain offline following Hurricane Laura.
Oil prices stepped higher in aftermarket trading after American Petroleum Institute data showed US crude stocks plunged 9.5 million barrels during the week ended Sept. 11. At 2032 GMT, October WTI was up around 20 cents from its settle at $38.48/b. Analysts surveyed by S&P Global Platts on Sept. 14 had called for a 1.8 million-barrel decline over the same period.
IEA lowers global demand outlooks
The International Energy Agency on Sept. 15 revised lower its 2020 oil demand outlook by 300,000 b/d to 91.7 million b/d, a contraction of 8.4 million b/d on the year. The agency cited renewed concerns around the coronavirus, pointing to the winter in the northern hemisphere as being "uncharted territory" for the virus and with huge challenges in key demand hubs.
IEA sees oil demand climbing 5.5 million b/d in 2021 to around 97.1 million b/d.
The IEA report comes on the heels of OPEC on Sept. 14 lowering its forecast for global demand by 400,000 b/d for 2020 and by 770,000 b/d for 2021. Oil demand is now forecast to average 90.23 million b/d in 2020 and 96.86 million b/d in 2021, well below the 2019 level.