Rystad forecasts crude price volatility as industry surveys damage after Hurricane Ida
Oil and gas companies and refineries in the US are assessing the impact on operations following Hurricane Ida. As the industry awaits damage reports from Louisiana and offshore production facilities, price volatility can be expected in global crude markets.
Rystad’s initial assessment of Hurricane Ida’s impact on US oil production and refinery capacity estimated a peak daily supply curtailment of 1.8m barrels per day (bpd) in the Gulf of Mexico. The Norwegian energy intelligence firm believes that close to 2m bpd of US Gulf Coast refining capacity is currently offline. Refineries are expected to remain offline for between 7 and 14 days, depending on the extent of damage due to flooding.
As a result, Rystad expects the monthly impact in August on Gulf Coast refining capacity to be around 160,000 bpd, and on runs around 150,000 bpd, but the monthly impact in September capacity could rise to around 640,000m bpd based on power availability and the repairs required.
“We see a risk that the loss of US refinery demand will be greater and more prolonged than the loss of crude supply, which, depending on the extent of refinery shut-ins and power outages, could further weaken the flat price, the structure for WTI and potentially WTI-Brent further for both September and possibly October 2021,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
The Gulf of Mexico accounts for 17% of total US crude oil production and 5% of total US natural gas production. “Offshore crude production should be able to bounce back relatively quickly, leading to an overall net negative effect on crude and conversely a bullish effect on road fuels such as gasoline,” Rystad said.
