Oil prices rise as storms cut US production
Oil was up on Monday as storms threatening the Gulf of Mexico shut more than half of the region’s offshore production, with the more dangerous of the two storms expected to hit later in the week.
Brent crude was up 68 cents, or 1.5%, at $45.03 a barrel by 1:43 p.m. EDT (1743 GMT). US West Texas Intermediate crude rose 26 cents, or 0.6%, to $42.60.
Energy companies shut more than 1 million barrels per day (bpd) of offshore crude oil production in the US Gulf of Mexico because of the twin threat from Tropical Storms Marco and Laura. Workers have been evacuated from more than 100 production platforms. Marco reached the coast Monday, and Laura was expected to accelerate to a hurricane and hit by midweek.
US gasoline futures jumped roughly 7% as refiners idled plants as a precaution.
“If we start flooding some of the oil wells and if the pipelines get shut down then there’s the possibility that we can see a crude spike as well,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
In addition to limiting production, the storms could curtail US exports, Flynn said. Brent’s gains outpaced US crude, in the expectation that other countries might be able to boost exports while Gulf facilities are shut.
Motiva Enterprises began preparations to shut its Port Arthur, Texas, crude refinery, people familiar with plant operations told Reuters. Motiva’s plant is the largest refinery in the nation.
Total SA also cut production to minimum at its 225,500 bpd Port Arthur refinery and was preparing for a possible shutdown.
Also supporting oil prices was a report by the Financial Times that US President Donald Trump is considering fast-tracking an experimental Covid-19 vaccine being developed by AstraZeneca and Oxford University. AstraZeneca denied having discussed an emergency use authorization for its potential vaccine with the US government and called speculation of such use “premature.”