DUBAI: Oil prices hit a five-month high on Wednesday as Hurricane Laura homed in on the heartland of the US energy industry.
With the hurricane strengthening and upgraded to a “catastrophic” Force 4 storm, the oil industry around the Gulf of Mexico was bracing itself for landfall in the next 24 hours.
Oil producers and refiners — including Saudi Aramco’s giant Motiva plant on the Texas coast, the largest refinery in North America — shuttered their operations for the duration of the hurricane.
Aramco said: “Motiva Enterprises is performing shutdown activities for its Port Arthur refinery and chemical plant ahead of Hurricane Laura. The safety of our employees, contractors and communities is a company core value and remains our top priority through any emergency event.
“Precautions are taken in advance of a potential storm to safeguard our personnel and physical assets as well as ensure reliable fuel supply in our communities after the storm passes.”
Crude prices jumped sharply as traders foresaw a shortage from US producers as a result of the disruption and potential damage to facilities. Brent crude, the global benchmark, leapt above $46 a barrel for the first time since March. West Texas Intermediate, the US standard likely to be most affected by the hurricane, rose above $43.
Most refinery complexes between Houston, Texas and New Orleans, Louisiana, were shut down and some coastal urban areas evacuated. The area has suffered billions of dollars of damage and lost production from hurricanes in the past, notably Katrina in 2005 and Harvey in 2017.
US oil giant ExxonMobil and Total of France were also among the oil companies battening down the hatches on their Gulf of Mexico operations. Analysts estimated that more than 1.5 million barrels of US oil production has been halted, about 85 percent of regional production.
The impact is likely to be felt in higher fuel prices in the US, a scenario President Donald Trump will not welcome ahead of the November presidential election. American oil stocks, high after the price meltdown in April, have been steadily drawn down in recent weeks as US motorists took to the roads for summer vacations.
Matt Stanley, director of global oil trader Star Fuels in Dubai, said: “Gasoline consumption going up and gasoline production coming down — hence I am bullish even if it is likely to be temporary.”
But the effect of the hurricane on a fragile oil market was unpredictable, Stanley said. “Once Laura has passed, we will see where the market will settle. But for the time being, hello $50.”
Source: Arab News