Hurricane Isaias shuts in nearly 63% of Gulf oil output

Offshore producers have stopped about 1.3 million barrels per day of oil output ahead of Hurricane Isaias. That is 62.9% of current Gulf of Mexico production as of Thursday, according to the US Marine Minerals Administration. The storm is forecast to come ashore on the northern Gulf Coast late Friday or early Saturday. With global supply already tight because of the eight-month war involving Iran, traders now want to know two things: how long the platforms will stay offline, and whether the storm damages any infrastructure.fxempire+1

Shut-ins jump as the storm gets stronger

The shut-ins grew quickly. As of Wednesday morning, the Bureau of Ocean Energy Management counted about 511,619 barrels per day offline, or 25.08% of regional output, plus 16.37% of natural gas production. In the latest assessment, the regulator said workers had been evacuated from 121 production platforms. Isaias became a hurricane Wednesday evening and had maximum sustained winds of 110 mph as of Friday morning.news.metal+1

Shell ↘ 0.02% and Chevron ↗ 0.20% cut back their Gulf operations on Wednesday. BP ↘ 0.24% removed all staff and stopped production at its Na Kika and Thunder Horse platforms. The Gulf supplies about 15% of US crude output. Research firms estimate the storm could cost about 11.2 million barrels of production in total, more than the roughly 7.1 million barrels lost to Tropical Storm Bertha in July.thestar+1

Platforms that escape damage can restart once they pass inspection and safety checks, but damaged facilities could stay offline longer. Damage reports may not come in until Saturday evening or Monday.fxempire

Refineries are the bigger worry

About half of US refining capacity sits on the Gulf Coast. Refineries are running near 93% of capacity, and stocks of refined fuels such as diesel and gasoline are close to historic lows. Industry sources say even small refinery outages could push retail fuel prices higher.cnbc

"This market is very much a products market," said Janiv Shah, vice president at Rystad Energy, pointing to a refinery bottleneck.cnbc

Oil prices swing

Brent crude settled up 4.1% at $$104.28$$ dollars a barrel on Thursday, and US West Texas Intermediate rose 3.6% to $$91.49$$ dollars. Prices came off their highs after President Donald Trump said talks with Iran were productive and promised not to attack Iran before the November 3 midterm elections. Both benchmarks dipped in Asian trading on Friday before rising again later in the session.thestar+2

Inventories had already been falling before the storm. The Energy Information Administration said commercial crude stocks dropped 3.2 million barrels to 424.1 million in the week ending October 2. It forecasts Brent will average about $$105$$ dollars a barrel in the fourth quarter.fxempire

Isaias adds to supply risks in the Middle East. "The frequency of Iranian attacks on ships is now at the highest point since the war began, and likely to intensify further," said Saul Kavonic, head of energy at MST Marquee.thestar