Hurricane Ida was hitting Louisiana in the USA. The hurricane has been downgraded to a tropical storm. Gasoline futures were up by 4% early in the trading session. The hurricane has caused disruptions and damage to offshore producers.
Producers in the Gulf of Mexico have pushed 1.7 million barrels of crude oil per day to prepare for the storm. However, disruptions at Louisiana refiners by the storm will delay operations.
Processing plants in Mississippi reduced capacity to around 2.11 million barrels, a reduction of 12% in total.
Crude oil and gasoline had a volatile trading month amidst fears of the delta variant spreading in Asia, the USA, and Europe. OPEC members are due to meet, and the expectation is an increased output.
The storm caused power outages and floods in the New Orleans and Louisiana coast. The hurricane was a Category 4 storm, and it pushed water inland and reversing the Mississippi river course.
Goldman Sachs analysts said they expect oil production to be faster than refinery production in the region. However, they cannot determine how long refineries will be out of operation.
Crude oil almost touched a yearly high
If the damage to refineries is significant due to the hurricane, it will cause them to stay shut for long periods. This will put pressure on supply, and gasoline prices will increase in the weeks to follow. Furthermore, utilities like power are affected.
An increase in exports will cover the supply gap; however, these shipments will take weeks to journey across the Atlantic ocean.
America’s most prominent fuel transportation system company, Colonial Pipeline Co, had to halt their principal network. They distribute fuel from the refineries in Texas and Louisiana to the eastern US customers.
Andy Lipow, president of Lipow Oil Associates, said that this category could result in 4 to 6 weeks of shut down for refineries.
Brent Crude was up 49 cents a barrel at $73.19 and, almost touching its yearly high of $73.69. US Crude oil increased by 37 cents to $69.11 a barrel, also close to the high of $69.64 this year.