Oil markets opened higher in Sunday evening trading on the back of what appears to be almost a complete shutdown of oil production and refining in the Gulf of Mexico and the Louisiana area affected heavily by Hurricane Ida.
Meanwhile, the head of the American Logistics Aid Network (ALAN), the organization that works with the private sector to help coordinate logistics aid into areas affected by storms and other disasters, sent out guidance mid-Sunday afternoon on how providers of supply chain services can assist ALAN’s efforts.
Despite the enormous impact Ida is having on U.S. production in the region that includes the Gulf of Mexico and the Louisiana refining center, markets were relatively restrained at their opening Sunday evening East Coast time.
S&P Global Platts, quoting data from the US Bureau of Safety and Environmental Enforcement, said Sunday that almost 96% of the Gulf of Mexico’s oil production is offline because of Ida, as well as a slightly smaller percentage of natural gas production.
Not only that but Platts reported that almost 4.4 million barrels/day of refining capacity is in the line of Ida’s path, and several of those refineries have closed as a precaution.
Despite the sweeping shutdowns, at 8:30 p.m. ET, the increase in key benchmark prices was significant but not wild. The price of ultra low sulfur diesel on the CME commodity exchange was at $2.1471, an increase of 3.79 cents/gallon or 1.8%. However, that is coming off a week in which the price of ULSD rose almost 20 cents over the prior five trading days, climbing Friday to $2.1092/g after settling the prior Friday at $1.9082/g.
That low settlement near $1.90 was from Aug. 20, and is something of an anomaly. The ULSD price had been steadily near $2.10/g as recently as two weeks ago.
The physical diesel market in the Gulf Coast has been strong recently. Platts reported in its Factbox that it publishes during a potential oil market crisis that the price of ULSD in the Gulf Coast traded Friday at 4.55 cents less than the CME price, the strongest level since the end of March.
Meanwhile, the price of RBOB gasoline on CME rose 2.74 cents at 8:30 p.m., to $2.3366/g, a gain of 6.24 cents. That was an increase of 2.74% from Friday’s settlement.
With the WTI crude benchmark up only 0.42% on Sunday evening, it shows that what the market is concerned about is not a loss of crude production capacity but outages at refineries. Power problems could slow the return of some facilities, and the list of refineries shut is a long one.
Platts, quoting Energy Information Administration data, reported that Louisiana has 17 refineries with a capacity of 3.4 million b/d. Some are chemical refineries but the big petroleum product refineries like Shell’s 230,600 b/d refinery in Norco, Louisiana, and the Phillips66 255,600 b/d Alliance refinery in Belle Chase, which are both down. Platts also reported that Valero has two refineries down in Louisiana, as well as a renewable diesel facility, and ExxonMobil was cutting back operations at its Baton Rouge refinery, which at 520,000 b/d is one of the biggest in the country.
The increase in product prices that wasn’t tracked by crude also is likely to be a function of a shutdown of the Colonial Pipeline. Unlike the shutdown earlier this year that led to supply issues along the route of the giant gasoline/diesel/heating oil/jet fuel pipeline — a result of a ransomware attack — the shutdown announced by Colonial on Sunday afternoon was said to be precautionary and did not signal problems with the line.
According to press reports, Colonial said it was closing its two product lines between the Houston area and Greensboro until it can assess any damage from Hurricane Ida. The Colonial line runs between the Louisiana refineries of the New Orleans area and those in Lake Charles and Baton Rouge.
Kathy Fulton, the executive director of the American Logistics Aid Network, sent out an email blast Sunday afternoon, along with a posting on ALAN’s homepage, pointing drivers and others to the best route for those looking to work with the organization.
ALAN’s mission has been to bring together various parts of the country’s supply chain to nonprofits that are trying to serve a population affected by a disaster, be it natural or manmade.
Her email and note on the group’s website directed interested parties to ALAN’s Supply Chain Intelligence Center, a portal for a broad swath of information useful to provide assistance. It also points readers to a microsite specifically targeted at Louisiana information.
Fulton’s statement also offers a place for providers of resources to “pre-offer … space, equipment, expertise or services,” and urges those who have those with assets not to “self-deploy to disaster-impacted sites.”