Hur­ri­cane Michael shut­ters 700,000 bpd of oil pro­duc­tion

Tehran Times - - ENERGY -

Hur­ri­cane Michael hit the Florida Pan­han­dle with winds of 155 mph yes­ter­day and is now mov­ing north, al­beit as a weaker, trop­i­cal storm. The hur­ri­cane shut in more than 40 per­cent of oil pro­duc­tion ca­pac­ity in the Gulf of Mex­ico, ac­cord­ing to data from the Bu­reau of Safety and En­vi­ron­men­tal En­force­ment, as well as al­most 32 per­cent of gas pro­duc­tion ca­pac­ity.

A to­tal of 89 plat­forms were evac­u­ated by the time Michael made land­fall on Wed­nes­day, as well as seven drilling rigs, with shut-in pro­duc­tion to­tal­ing al­most 718,900 bpd. Some 813 mil­lion cu­bic feet of nat­u­ral gas pro­duc­tion has also been taken off­line this week.

De­spite the high por­tion of shut-in ca­pac­ity in the Gulf, the chances of it af­fect­ing prices in any mean­ing­ful way are slim: most of U.S. pro­duc­tion comes from on­shore re­serves, so the 40 per­cent of GOM ca­pac­ity not pro­duc­ing this week rep­re­sents just 6 per­cent of the to­tal na­tional pro­duc­tion ca­pac­ity.

Mean­while, Michael has be­come the third-strong­est storm in U.S. his­tory, wreck­ing north­west­ern Florida and killing two peo­ple, one of them a child as it felled trees and flooded coastal towns.

All in all, this year’s hur­ri­cane sea­son was sup­posed to be milder than last year’s. In 2017, the worst hur­ri­cane to hit the U.S. coast was Har­vey, which shut down about one-fifth of na­tional re­fin­ing ca­pac­ity, caus­ing ma­jor buildups in crude oil in­ven­to­ries. The shut­downs came a few weeks be­fore many re­finer­ies were sched­uled to un­dergo main­te­nance, and some were forced to do so as they had de­layed reg­u­lar main­te­nance work for weeks and even months.

For this year, Colorado State Univer­sity ear­lier re­vised its fore­cast for the num­ber of named storms this sea­son to 11 from 14.

With 20 per­cent of U.S. crude pro­duc­tion ca­pac­ity and 45 per­cent of re­fin­ing ca­pac­ity in the Gulf of Mex­ico, it is easy to see why storm fore­casts are im­por­tant for oil traders—bulls and bears alike. Last year the bulls had rea­son to cel­e­brate (al­though they prob­a­bly didn’t do so openly) as storm losses hit US$200 bil­lion, the high­est storm bill in his­tory.

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