US Gulf Coast sour crude oil price differentials continued to skyrocket Sept. 8, boosted by lingering supply disruptions due to damages and delays caused by Hurricane Ida.
Sour crude Mars reached a one-year high, with trades head done at a $1.25/b and $1.50/b premium to Cushing WTI, S&P Global Platts data showed.
At WTI plus $1.50/b, Mars was up $4.10/b compared to pre-storm levels on Aug. 24, and at its highest assessed value since Sept. 8, 2020 at WTI plus $1.70/b.
Ida made landfall as a category 4 major hurricane Aug. 29 near Port Fourchon, southeast of New Orleans.
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While trading for USGC sours has remained fairly slim since the storm, prices have strengthened as traders and brokers said the recovery process following Ida could take weeks or even months.
“Anything to do with Louisiana is in short supply,” one crude broker said. “I think the destruction will make this a long, drawn out process.”
Fully ten days after Ida made landfall, 1.399 million b/d of crude oil production remained offline in the Gulf of Mexico as of Sept. 8, Bureau of Safety and Environmental Enforcement reported, amounting to 76.88% of the Gulf’s total output.
The storm caused significant damage to coastal infrastructure that has hampered platform surveys and repairs, contributing to extended timelines for production restarts. To-date, the storm has kept some 20.64 million barrels of crude in the ground since the first shut ins were announced Aug. 26.
“During the historic 2020 Atlantic hurricane season, output from the US Gulf reached complete recovery within 10 days post initial curtailments,” said S&P Global Platts Analytics analyst Sami Yahya. “Even during the most disruptive period when Marco/Laura tag-teamed the US Gulf in August and September of 2020, the US Gulf crude output was more than 70% recovered ten days after peak shut-ins (compared to 20% with Ida) and operators at the time were able to restore more than 300,000 b/d each day.”
Port Fourchon said Sept. 7 that several of its larger tenants “have either returned to operations or are readying themselves for operations in the port.”
Port roadways are open, while “vessels can travel in port waterways,” although only during daylight hours, the port said.
“Bayou Lafourche north of the port is closed to marine traffic due to multiple obstructions in the channel, especially between the Ted Gisclair Floodgate in Larose and the Leon Theriot Lock in Golden Meadow,” the port said.
Onshore damage delays platform restarts
Upstream companies released more details of their operations Sept. 8 in filings and presentations.
BP said it has begun to restart its US Gulf of Mexico operations, and has both recrewed and resumed production at its Atlantis and Mad Dog platforms. Production should resume at Thunder Horse and Na Kika “in the coming days,” the company said. “We cannot predict how long this process will take.”
Also, repairs are underway at BP’s onshore Houma and Port Fourchon offshore assets, it said. The company has temporarily relocated its shore base to Galveston, Texas and heliport to Lafayette, Louisiana.
Murphy Oil currently has 9,000 boe/d net producing in the US Gulf, although 1,000 boe/d will remain offline for repairs, the company said in its September investor presentation. That compares to the company’s US Gulf production of roughly 85,000 boe/d in second-quarter 2021.
“[There are] no indications of any pipeline leaks” affiliated with Murphy, the company said.
Murphy’s Port Fourhcon shorebase will reopen “in the near term,” although backup locations are operational, it said.
Occidental’s 10 offshore platforms in the US Gulf did not suffer any storm-related damages, the company said in a US securities filing Sept. 8. Of the ten platforms, three have restarted production and three additional platforms are “prepared to restart production shortly,” the company said.
Occidental did not specify which platforms were shut in and which had resumed production.
Occidental said it had temporarily relocated its shore-based operations due to storm damage, adding that its operations rely upon third parties and consequently it could not provide a timeline for full restoration. The company’s Louisiana-based chemical facilities did not incur any material storm-related damage and are currently being restarted.
“As a result of the widespread impact to Louisiana power infrastructure, these facilities will likely initially operate at reduced capacity before increasing operating rates as the supply of feedstock and power becomes increasingly available, Occidental said.
Chevron said late Sept. 7 that its offshore facilities “did not sustain any significant damage due to Hurricane Ida.”
“We have redeployed essential personnel to all six facilities, where workers are preparing to restore production,” the company said in a statement. “Fourchon terminal and Empire terminal and their related pipeline systems remain shut in. Our teams have begun initial assessment of the damages to the facilities.”
Louisiana refiners are in the process of returning to service, although some have been delayed by continued power outages.
PBF Energy expects most of its 190,000 b/d Chalmette, Louisiana, refinery back online by the end of week starting Sept. 12, a company spokesperson said Sept. 8.
ExxonMobil’s 520,000 b/d Baton Rouge refinery had begun restarting the plant on Sept. 1, while Marathon began restarting its 578,000 b/d Garyville plant on Sept. 3.
Shell’s 227,400 b/d Norco refinery remains without power, as does Valero’s 215,000 b/d Norco plant.
Source: Platts