HOUSTON (Reuters) - More than a fourth of U.S. Gulf of Mexico offshore oil and gas production remains shut by Hurricane Sally, which moved inland early Wednesday, dumping heavy rains and cutting fuel demand in the U.S. Southeast.
The storm made landfall near Gulf Shores, Alabama, as a powerful Category 2 hurricane. Oil prices rose early on Wednesday, in part on the expectation of a temporary drop in U.S. production.
Nearly 500,000 barrels per day (bpd) of offshore crude oil production and 759 million cubic feet per day (mmcfd) of natural gas output were shut in the U.S. Gulf of Mexico, according to the U.S. Interior Department. That is roughly a third of the shut-ins caused by Hurricane Laura, which landed further west in August.
Oil and chemical ports along the Mississippi River were moving to reopen with restrictions, and oil and gas producers were preparing to return workers to offshore platforms.
The hurricane was between Gulf Shores and Pensacola, heading northeast at 4 miles (7 km) per hour with sustained winds of 85 mph (140 kph), the National Hurricane Center said at 9 a.m. CDT (1400 GMT).
The NHC canceled storm surge warnings for the Louisiana coastline, signaling the removal of a threat to oil refineries in that state. Phillips 66's PSX.N 255,600-bpd Alliance, Louisiana, refinery remains shut and Royal Dutch Shell RDSa.L cut production to minimum at its 227,400-bpd Norco, Louisiana, refinery.
There was 1.1 million bpd of U.S. Gulf Coast refining capacity offline on Tuesday, according to the U.S. Energy Department, including two plants under repair since Laura and another halted by weak demand due to the COVID-19 pandemic.
GRAPHIC: Hurricane Sally forecast track -
OIL PRICES RISE
Crude oil futures LCOc1CLc1 rose more than 2% on Wednesday, paring gains after a drop in U.S. crude stockpiles. [EIA/S]. Gasoline futures RBOB also climbed nearly 2% despite a larger-than-expected draw in inventories.
“Even if the weather keeps production shut for a couple of days, the sheer volume of its size is enough for the market to breathe a bit,” said Rystad Energy senior oil markets analyst Paola Rodriguez-Masiu in a comment.
The Colonial Pipeline, which brings fuel from refineries to the U.S. East Coast, was operating normally, its operator said.
The NHC warned Sally could bring “catastrophic and life-threatening” flooding along portions of the Gulf Coast with 10 to 20 inches (25-50 cm) of rain expected and up to 30 inches in some spots.
Reporting by Erwin Seba in Houston and Stephanie Kelly in New York; editing by Jonathan Oatis and Marguerita Choy
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Hurricane's heavy rains to dampen U.S. fuel demand, offshore sites closed - Reuters
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