Market Overview

Tropical Storm Barry Already Impacting Gulf Oil Production

Tropical Storm Barry Already Impacting Gulf Oil Production

As Tropical Storm Barry eyes the Louisiana coast, some crude oil producers and refiners aren't taking any chances with safety, shutting down operations until the storm passes.

SONAR Critical Events: Forecast for Tropical Storm Barry as of Thursday afternoon, July 11, 2019.

So far, nearly 20 offshore oil and gas platforms in the Gulf of Mexico have been at least partially evacuated, including some run by Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX). But, according to FreightWaves Market Expert John Kingston, stocks of crude oil are relatively healthy. So, the bigger concern is storm surge and flooding that could impact the numerous refineries in the New Orleans metropolitan area.

Officials at some refineries said on Wednesday (July 10) that they were monitoring the storm, and that no cutbacks in production had been implemented. That changed today (July 11) after officials with the ConocoPhillips Alliance Refinery announced their plan to temporarily suspend operations by early Friday (July 12). The refinery, located in Belle Chasse, is one of the largest in southern Louisiana. According to its website, it handles a crude oil capacity of around 247,000 barrels per day. It's also in Plaquemines Parish's mandatory evacuation zone.

The Marathon Petroleum refinery in Garyville, Louisiana has a crude oil capacity of 564,000 barrels per day, but according to the FreightWaves SONAR Critical Events, this facility is at a lower risk of storm damage than the Alliance Refinery. However, a slight shift in Barry's forecast path could change that.

Crude prices and gas prices at the pump have gone up this week ahead of anticipated declines in inventories. Here's what this means for carriers, shippers and brokers, according to Kingston: At this point, landfall for Barry isn't expected until Saturday, and there could be further cuts in production in the Gulf of Mexico. When and if more refineries shut down is uncertain, and relies heavily on the forecast for storm surge, which points to one to three feet of surge in the New Orleans/Lake Pontchartrain area. Because the Mississippi River is so high right now, water could "overtop" the levees.

The reality is that because so much of U.S. production is inland as a result of the shale revolution, tropical systems don't have quite the disruptive force that they might have when, for example, Katrina or Ivan knocked out huge quantities of offshore production. However, a storm surge that disrupts refinery operations is a different beast. That's more important than crude production outages.

SONAR Critical Events: ConocoPhillips Alliance Refinery in forecast path of Tropical Storm Barry. High risk of damage as of July 11, 2019.

As of 5:00 p.m. Eastern time today, the center of Tropical Storm Barry was 90 miles south of the mouth of the Mississippi River, or about 175 miles southeast of Morgan City, Louisiana. Its sustained winds peaked at 40 mph, and its forward speed was trudging westward at only five mph. The latest outlook from the National Hurricane Center has Barry making landfall on the central Louisiana coast Saturday morning, July 13, possibly as a Category 1 hurricane with winds of at least 74 mph. Various Watches and Warnings have been issued across southern Louisiana regarding storm surge, flooding and possible wind damage.

Image sourced from Pixabay

Posted-In: Freight Freightwaves gulf resources Oil Supply ChainNews General


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