With what was projected as a gargantuan hindrance to the US oil production industry, the dimming down of Hurricane Laura has spared oil refineries from heavy flooding, leading to nationwide price drops.
Bracing themselves against a catastrophic ‘Category 4’ calamity that was set to hamper production immensely, US manufacturers had shut 1.56 million barrels per day (bpd) of crude output, or 83 percent of the Gulf of Mexico’s production, while nine refineries had shut about 2.9 million bpd of capacity, or 15 percent of US processing capacity, ahead of the storm.
Luckily, with the simmering of the storm within hours of making its landfall, refineries along the coasts of Texas and Louisiana have faced no substantial damage to their modus operandi.
“With the US Gulf hurricanes out of the way and preliminary assessment showing no damage to the upstream or downstream facilities, crude has surrendered most of the storm premium and could enter a holding pattern again,” said Vandana Hari, oil market analyst at Vanda Insights.
With the storm dropping to a ‘Category 1’ late Thursday, US West Texas Intermediate (WTI) crude futures were down $0.03, or 0.1 percent, to $43.01 a barrel at 04:09 GMT, Friday.
Hurricane Laura hit Louisiana early on Thursday with winds of 150 miles per hour, damaging buildings, knocking down trees and cutting power to more than 650,000 people in Louisiana and Texas, but refineries were spared from feared flooding.
Though the crisis is averted, investors are shifting their concerns from production outages to demand destruction, analysts have claimed. “Crude prices have barely budged this week, but refining margins have been hammered as flash floods disrupt normal consumption patterns, likely for a longer period of time than (Gulf of Mexico) production remains offline,” said RBC Capital in a note.