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Ida’s effect muted GOM hurricane price impact dulled by delta, end of summer driving season Steve Sutherlin Petroleum News
Alaska North Slope crude inched lower by 11 cents Sept. 1, to close at $71.35 per barrel, while West Texas Intermediate gained 9 cents to close at $$68.59 and Brent dropped by $1.40 to close at $71.59.
For ANS and Brent, it was the seventh consecutive close above $70 following a plunge into the mid-$60 range in mid-August and choppy trading all month long. WTI traded in the high $60s over the week ending Sept. 1, following its own plunge into the lower $60s.
The price stability was remarkable given the countervailing factors pulling on the market, including a devastating hurricane in the Gulf of Mexico, a production adjustment meeting of the Organization of the Petroleum Exporting Counties and its allies, ongoing demand fears due to new variants of COVID-19, the first full FDA approval for a COVID-19 vaccine, strong inventory draws on U.S oil and gasoline stockpiles and ongoing negotiations between the United States and Iran which might affect sanctions on Iranian oil exports.
Despite firming near the end of the month, oil prices fell in August. ANS closed at $71.46 Aug. 31, down $4.52 from the July 30 close of $75.87, a loss of 5.9%. WTI closed at $68.59 Aug. 31, down $5.36 from the July 30 close of $73.95, a loss of 7.2%. Brent closed at $71.59 Aug. 31, down $4.74 from the July 30 close of $76.33, a loss of 6.2%.
Hurricane effects muted Prices rose modestly on Aug. 30, the first trading day after the Category 4 Hurricane Ida made landfall in Louisiana just before noon Aug. 29. ANS gained 42 cents Aug. 30 to close at $72.05, WTI lifted 47 cents to close at $69.21, and Brent popped 71 cents to close at $73.41.
The hurricane boost was short lived. The gains of ANS and WTI were relinquished the next day, and Brent slid as well.
As of 12:30 p.m. EDT Aug. 31, an estimated 94% of oil production and 94% of natural gas production in federally administered areas of the U.S. Gulf of Mexico remained shut-in, according to the Bureau of Safety and Environmental Enforcement.
The U.S. Department of Energy said in a Sept. 1 situation report that seven refineries in Louisiana remain shut, accounting for about 1.7 million barrels per day of refinery capacity, approximately 9% of total U.S. operable refining capacity.
The refinery and offshore platform shut-ins are not anticipated to cause immediate supply issues, DOE said.
“For the week ending on August 20, Gulf Coast stocks of gasoline and distillate were 3% and 5% above the seasonal five-year average,” DOE said, adding that Gulf Coast stocks of crude oil were essentially in line with the five-year average, not including the Strategic Petroleum Reserve.
The impact of the storm on refined product supply initially appeared to be greater than the impact to crude supply, IHS Markit said in a Sept. 1 release, but it expects the impact on pump prices to be muted - between 2 cents and 5 cents per gallon in the upper range.
“The spread between demand and supply was not as skewed towards demand as it would have been had there not been a resurgence of the Delta variant of the coronavirus,” said Debnil Chowdhury, IHS Markit executive director. “This is also the time of year where seasonal gasoline demand peaks and starts to fall heading into winter; as a result, outright prices are not expected to increase much higher than what we saw immediately after landfall.”
Most of the shuttered refineries are expected to be back online within three weeks, IHS Markit said. A small number of refineries that sustained significant wind and flood damage will be down for as much as two months.
OPEC+ will add production OPEC+ will proceed with its scheduled 400,000 bpd oil production increase in October.
The production boost was ratified at the 20th OPEC and non-OPEC Ministerial Meeting, held by videoconference Sept. 1.
OPEC said that while the effects of the COVID-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened, and that Organization for Economic Co-operation and Development stocks continue to fall as the recovery accelerates.
It said overall conformity to production adjustments by participating countries in the OPEC+ Declaration of Cooperation was 110% in July, “reinforcing the trend of high conformity.”
According to a Bloomberg report, the meeting was wrapped up in less than one hour, in stark contrast to July’s meeting.
The meeting to establish August production levels originally scheduled for July 1 was delayed, extended and then postponed before an agreement was reached July 14.
The next such meeting will be held Oct. 4.
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