Oil Production in the Gulf Continues to be Affected

Up to 16 percent of oil production in the Gulf of Mexico is still offline, following the two recent hurricanes which greatly damaged infrastructure and operations.

Hurricane Ida and Hurricane Nicholas’ aftermath in oil production in the Gulf keeps taking its toll. According to the United States Bureau of Safety and Environmental Enforcement (BSEE), up to 16 percent of crude oil production, approximately 300,000 barrels per day, is offline as companies deal with damage control and restoration. Ida’s effects in particular are expected to linger, as revealed by the bureau’s final report on devastation.

The same report shows that 31 production platforms are still evacuated, all of them located offshore in the Gulf. Gas production has suffered as well, with approximately 25 percent of production offline. Moreover, the report revealed that Hurricane Ida is “responsible for the largest-ever initial loss of crude oil production in the U.S. Gulf of Mexico from a hurricane.” Indeed, at the time it hit, Ida took with itself almost the entire oil production capabilities in the U.S. part of the Gulf, and up until Sept. 14, about half remained shut down.

While companies are doing their best to cope with damages, others have had to take more severe measures. For instance, Shell has revealed that operations in at least one of its platforms are likely to remain offline for the remainder of the year due to the damage it took, affecting next year’s output already. For instance, a refinery owned by Phillips 66 has been shut down for good, foregoing all repair efforts.

The effects from both hurricanes on production have rightfully affected prices as well. On Thursday, Brent crude reached its highest level in over two months, caused by soaring fuel demand and depletion of crude inventories; it went for US$77.25 a barrel, a 1.4 percent increase and its highest since mid-July. On its part, West Texas Intermediate (WTI) went for US$73.3 a barrel, for a 1.5 percent increase.

Phil Flynn, Senior Analyst at Price Futures Group, said “the reality is setting in - there's more talk about global inventories tightening and there are concerns about supply issues going into winter,” referring to growing concerns about the offline facilities. Moreover, OPEC countries have struggled to increase their output due to pandemic-related delayed maintenance works.

Recently, MBN has reported on the aftermath of both hurricanes and their effects on production. Ida caused gasoline prices to rise as early this month where up to 95 percent of operations were halted, and by the time Tropical Storm Nicholas made its way too, about half of production was still shut down.