Focus on Fracking: natural gas price at a 33 month high; US crude supplies at a 23 month low; Ida shuts down Gulf Blogger RJS, MarketWatch 666
Oil prices ended slightly higher this week as oil traders apparently judged that Hurricane Ida’s damage to oil production was greater than the storm’s damage to refining and to fuel demand . . . after rising more than 10% last week as Chinese virus cases fell to zero, a quarter of Mexico’s oil production was knocked out, domestic gasoline demand rose to pre pandemic levels, and the approaching hurricane disrupted US Gulf operations, the contract for US light sweet crude for October delivery opened 0.8% higher on Monday after Hurricane Ida came ashore at Port Fourchon, Louisiana, where supertanker trade and offshore drilling is staged, but turned negative and fell to a 1% deficit after the storm was downgraded and traders thought it might pass without major issues, before rallying again to finish 47 cents higher at $69.21 a barrel, rallying as Gulf Coast platforms, refineries and pipelines grappled with uncertainty on restart timelines after Ida wreaked havoc on the region….but the rally faltered Tuesday, as reports indicated that refineries west of New Orleans had regained power, and that the Colonial Pipeline to the east coast was to have resumed operations overnight, and then moved lower amid calls from the US for OPEC to pump more crude, and settled down 71 cents at $68.50 a barrel, thus ending 7.4% lower for the month of August, the largest monthly loss since last October…oil prices drifted lower early Wednesday after data from the American Petroleum Institute showed a surprise build in US gasoline inventories during the final full week of August, and as traders positioned ahead of Wednesday’s OPEC meeting, but then popped after the EIA reported a greater than expected draw from crude inventories to settle 9 cents higher at $68.59 a barrel…oil prices opened 30 cents lower on Thursday after OPEC added their scheduled 400,000 barrels per day of production to global markets, but shifted higher in morning trading, lifting front-month oil futures above $69 per barrel after a stronger-than-expected reading on U.S. unemployment claims raised optimism that August’s jobs report scheduled Friday might show an accelerated pace of recovery in the labor market. then rallied to above $70 a barrel before settling at a one-month high of $69.99 a barrel, bolstered by a rapidly weakening U.S. Dollar Index amid reports offshore producers in the Gulf were unable to restart operations due to logistical constraints….nearby month oil contracts continued to trade above $70 early Friday, as traders evaluated the effect of prolonged supply disruptions offshore on the market’s near-term supply-demand disposition, as over 90% of the regional oil production was still shut-in, but turned lower after the labor department reported August’s job increase was only one-third of what had been expected and tumbled to close down 70 cents at $69.29 a barrel for the day, but still managed to salvage an 0.8% gain for the week, as the impact of Hurricane Ida continued to snarl U.S. oil production . . .
Natural Gas Prices
Meanwhile, natural gas prices rose to yet another 32 month high on another low inventoriy build as hurricane Ida disrupted both production and exports . . . after September natural gas contract prices rose 13.5% to expire at $4.370 per mmBTU last week, following an unexpectedly small increase in supplies, the contract price of natural gas for October delivery became the quoted front month price for this week and fell 8.3 cents to $4.305 per mmBTU on monday on projections for lower temperatures in the immediate term, and as Ida weakened to a tropical storm after making landfall on the Gulf Coast.,..but natural gas prices rebounded from an early 2% plunge on Tuesday to close 7.2 cents higher at $4.377 per mmBTU, the highest close since 2018, as the near-term prospects of another small storage injection stole the limelight from Hurricane Ida’s toll on demand . . . natural gas prices then soared over 7% to $4.615 per mmBTU on Wednesday as traders anticipated Thursday’s inventory report would likely indicate a low addition to supplies, while a dent to production in the Gulf after Ida further elevated prices…natural gas prices continued climbing on Thursday, reaching a November 2018 high, after the natural gas storage report came in lower than market expectations, before settling with a 2.6 cent gain at $4.641 per mmBTU . . . natural gas prices rose again on Friday, capping a second straight week of big gains with a 7.1 cent increase to $4.712 per mmBTU, as significant output remained offline in the aftermath of Hurricane Ida, exacerbating supply concerns in an already tight market. that left natural gas prices 7.8% higher on the week, while the October contract, which had closed at $4.388 per mmBTU last week, finished with a 7.4% gain . . .
Colonial Pipeline temporarily halts gas delivery as Hurricane Ida hits –As Hurricane Ida hits the Gulf Coast, a critical fuel artery for the Southeast U.S. has halted operations along two lines from Houston to Greensboro, North Carolina. The Colonial Pipeline said it had temporarily shut down those operations until it’s safe to resume. Fuel supplies still exist at terminals along the Southeast, and lines stretching from North Carolina to New Jersey are still in full operation. “We know that millions of Americans, along with our customers and other businesses, benefit from our system for critical fuel supplies at times like these,” Wes Dunbar, vice president of operations for Colonial Pipeline, said in a statement. “As part of our weather preparedness and response plans, we have procedures in place to ensure the safety, protection and integrity of our pipeline and our assets – including proactively shutting down our lines when necessary.” The Colonial Pipeline plans to perform safety evaluations and assess any impact made by the storms before reopening Lines 1 and 2, which stretch along the Southeast. In May, the pipeline went down for days after a ransomware attack, creating gas shortages as hordes of motorists rushed to the pump throughout the Southeast. Experts do not expect a similar outcome this time. Patrick De Haan, head of petroleum analysis for fuel-savings app GasBuddy, told USA TODAY that the Colonial Pipeline would likely come back online later today.
Producers shut in 95% of US Gulf oil volumes; refiners close plants as Hurricane Ida makes landfall | S&P Global Platts – Power outages in Louisiana and beyond were spreading Aug. 29 after Category 4 Hurricane Ida made a Louisiana landfall, after roughly 95% of the US Gulf’s oil and gas production was shut in and many Louisiana refineries and petrochemical plants were closed in advance of the major storm. Ida was upgraded to a Category 4 hurricane with maximum sustained winds of 150 mph on Aug. 29, according to the US National Hurricane Center, before making landfall south of New Orleans near Port Fourchon just before noon CT as one of the most powerful storms to ever hit the US Gulf Coast. By 4 pm CT, Ida remained at Category 4 strength, but the sustained winds were down to 130 mph. The US Bureau of Safety and Environmental Enforcement said Aug. 29 that 95.65% of the US Gulf’s crude oil, or 1.741 million b/d, already was shut in, as well as 93.75% of the region’s approximately 2.2 Bcf/d of natural gas production, or about 2.091 Bcf/d. An estimated 288 offshore platforms were evacuated — 51.4% of the US Gulf’s total. Close to 4.4 million b/d of operating refinery capacity is in the path of Ida as well, primarily in Louisiana, and at least half of that at-risk capacity came offline ahead of Ida as Phillips 66, Shell, ExxonMobil, Valero and others closed refining units. Ida’s wind speed will play a major role in how hard it strikes at the heart of USGC refining centers, according to S&P Global Platts Analytics. The greatest impacts are expected in the eastern Louisiana refining and petrochemical hubs from Baton Rouge to New Orleans and potentially to Mississippi. If the hurricane comes in with 120 mph winds or stronger, it could be “a major factor” in disrupting refining and petrochemical operations, Platts Analytics said. Ida would become a Category 5 hurricane if its winds hit 157 mph. “Hurricane Ida is expected to come ashore along the same path as other storms, which did extensive damage to USGC refining and petrochemical facilities. Many plants have been hardened against hurricanes, but disruptions in operations are still very likely due to flooding, power outages and personnel dislocations,” Platts Analytics said. Colonial Pipeline — the primary fuel artery from Houston to the South and East Coast — said Aug. 29 it temporarily shut down its Lines 1 and 2 systems from Houston to Greensboro, North Carolina. Colonial said the rest of the network from North Carolina to New Jersey is operating normally. Colonial said the closure is precautionary and should resume full service after Ida passes and the system is evaluated. As of 3:30 pm CT Aug. 29, more than 410,000 customers were without power in Louisiana, led by 401,452 Entergy customers and 12,869 Cleco customers. Another 1,817 Entergy Mississippi customers were without power. A hurricane typically causes power demand destruction, as it severs transmission and distribution lines to loads. With weaker demand, lower prices would be expected, but much of the nation’s natural gas flows through Louisiana, and Ida could disrupt that infrastructure and increase pressure on gas prices. Historically, offshore production has returned to pre-storm levels 10-14 days after initial declines, placing the week of Sept. 6 as a likely time for production to fully rebound, according to Platts Analytics. The reduced supply levels helped trigger spikes in crude oil, natural gas and refined products prices on Aug. 27 at the end of weekly trading, including gasoline and jet fuel prices. Most producers had shut in production and evacuated all crews from the US Gulf prior to Aug. 29.