95% of oil gas production in the Gulf of Mexico was offline, nearly 20% of U.S. refining capacity was damaged

Hurricane IDA has made landfall on the GULF Coast of the United States at a vulnerable time as the COVID-19 pandemic intensifies in several states in the region, devastating the heartland of the US oil gas industry with a combination of catastrophic hurricanes. According to US media reports, IDA is the first strong hurricane to hit the US Gulf Coast this year, the fifth largest hurricane to hit the US in history. It can be compared to Hurricane Katrina 16 years ago, will bring great challenges to power supply, oil gas production, downstream refining, fuel transportation so on.

Production came to a complete halt

IDA's landfall was "bad" for the U.S. oil, gas power industries. Reuters reported that Louisiana was the first state to be affected by IDA. Just hours after the storm made landfall, the entire city of New Orleans was already without power. More than a million people in Louisiana were temporarily without power, the state utility, Louisiana Energy, said the outages could last for weeks.

As IDA made landfall near the Louisiana Offshore oil Port, a large private oil terminal in the United States, oil transportation, loading other activities were suspended. The port said it would suspend any fuel deliveries until the effects of the storm subsided. The port handles 10 to 15 percent of U.S. domestic oil 10 to 15 percent of imported oil, is linked to about half of U.S. refineries petrochemical plants.

IDA knocked 765,000 barrels a day of oil production offline the GULF coast, according to S&P Global Platts, an industry analyst.

More than 95% of oil production in the U.S. Gulf Coast region has been suspended, according to the U.S. Bureau of Safety Environmental Enforcement. More than half of oil gas production platforms 11 drilling RIGS have been evacuated, meaning 1.74 million barrels per day of oil production in the region has been taken offline.

There was also a total shutdown of natural gas production in Louisiana, which accounts for about 9% of the nation's total natural gas production. Louisiana accounted for 55% of U.S. LNG exports last year, according to the U.S. Energy Information Administration.

Refining capacity has been hit hard

More worrying, IDA caused severe storm flood damage to refineries petrochemical plants in Louisiana along the Mississippi River.

About 1.9 million barrels a day of refining capacity along the Mississippi River, 10% of U.S. refining capacity, has been shut down operating at reduced rates, according to the U.S. Safety Environmental Enforcement Agency. Seventeen refineries in Louisiana have also been forced to suspend operations, meaning more than 4 million barrels a day of refining capacity offline, nearly 20 percent of the nation's refining capacity, S&P Global Platts noted.

IDA caused an "extremely rare" reversal of the Mississippi River, which flows north to south into the Gulf of Mexico, in Louisiana, a low-lying state prone to flooding, CNN reported. While refineries petrochemical plants are usually able to withstand strong winds, they were prepared for high water.

"We've had this shock too many times in the past few decades. Almost exactly a year ago, several refineries in Lake Charles, west of IDA's projected path, were damaged by Hurricane Lola." "Heavy rains flooding are the biggest concerns for the refinery industry," said Peter McNally, energy analyst at Consulting Firm Collinn. "Hurricane Harvey in 2017 caused refineries to be flooded oil products to be 'scrapped.'"

As of early September, Chevron shut down terminals associated pipeline systems along the Mississippi River Gulf Coast, while Shell, Marathon Crude Valero Energy shut down refineries associated facilities near IDA's path.

It is understood that the east coast of the United States 60% of gasoline diesel oil the gulf coast refineries, most of which are located on the "IDA" path through the oil pipeline, the pipeline by the larger fuel pipeline operators Chloe Neil pipeline transport operations, the company has closed the two pipes, each tube 8851 kilometers long.

IDA could shut down refineries for four to six weeks more, according to Houston-based Lipo Oil Consulting.

Gasoline prices continue to jump

U.S. gasoline prices continue to rise as a result of IDA, the market expects it will take one to three weeks to recover to pre-hurricane levels, ap reported. Against this backdrop, the market will continue to weigh the impact of IDA on international oil prices the supply of domestic oil products.

Data compiled by S&P Global Platts also show gasoline futures prices have been jumping since late August on concerns that IDA could lead to a prolonged disruption in the supply of U.S. petroleum products. U.S. gasoline futures rose 2.75% as of Aug. 30.

The average U.S. price for unleaded gasoline was $3.15 a gallon on August 31, the highest for the Labor Day holiday in seven years, up $2.23 a gallon a year ago, according to AAA.

The consensus is that gasoline prices in the Southeast could accelerate into the fall if refineries suffer extensive damage lose power are forced to shut down for an extended period. It is understood that European traders are already preparing to fill the supply gap in New York Harbor, temporarily chartering tankers, but the transatlantic crossing will take two weeks.

The average price of a gallon of regular gasoline jumped 18% in the week after Hurricane Katrina hit in 2005, the largest weekly increase since the 1991 Gulf War, according to the ENERGY Information Administration, while natural gas prices took two months to recover to pre-hurricane levels.

U.S. gasoline inventories, while still relatively abundant, could be depleted quickly by the second week of September as IDA hits, to their lowest level since February, ACCORDING to S&P Global Platts.

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Source: International Gas Network