Hurricane Michael is getting bigger and bigger and the oil and the natural gas market is starting to pay attention. Earlier in the week most oil traders were thinking the storm might have a limited impact on production because the track of the storm was away from refineries and major Gulf of Mexico Production Areas, yet that was before this storm turned into a Category 4 monster and rising the sea to levels that could damage some offshore oil platforms with flooding and storm surges.
In 2008, the American Petroleum Institute released a new set of standards for offshore platforms from 70 feet in the 1990s, to 91 feet because of the damage caused by Katrina and Rita. The Pacific Standard reported that in 2005, when Hurricanes Katrina and Rita tore across the Gulf as Category 5 storms with winds of up to 175 miles per hour and gusts as high as 235 miles per hour, 115 platforms were destroyed and dozens more damaged. Nine months later, federal offshore oil production was still down by 22 percent. Now, while more precautions have been taken a Category 4 or 5 storm could do some lasting damage.
Natural gas is also getting a boost on the storm as supplies are below average and the market is concerned about losing any production. The Bureau of Safety and Environmental Enforcement (BSEE) estimated yesterday that approximately 39.5 percent of the current oil production in the Gulf of Mexico has been shut-in. It is also estimated that approximately 28.4 percent of the natural gas production in the Gulf of Mexico has been shut-in.
Reuters reported that the country’s largest privately-owned crude terminal, the Louisiana Offshore Oil Port LLC, said on Tuesday it had halted operations at its marine terminal. The facility is the only port in the United States capable of fully loading and unloading tankers with a capacity of 2 million barrels of oil.
Companies turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to an offshore regulator, the Bureau of Safety and Environmental Enforcement (BSEE).
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