Adedapo Adesanya
By Adedapo Adesanya
Prices of crude oil rose on Monday as a huge chunk of production in the United States section of the Gulf of Mexico has been shut as hurricane Ida passed through it before making landfall in the state of Louisiana.
According to data from the Bureau of Safety and Environmental Enforcement (BSEE), a total of 288 production platforms in the Gulf of Mexico have been evacuated.
This meant that about 1.74 million barrels in daily production or 95.7 per cent of the total produced in the Gulf was shut in, along with 2.09 billion cubic feet of natural gas production daily, or 93.8 per cent of the total, the BSEE reported.
Refiners along the Gulf Coast also shut down their facilities including facilities managed by oil majors including Shell, Exxon Mobil, Marathon, and Valero.
The shut-in refining capacity totalled 2.11 million barrels per day or about 12 per cent of the national total. The figure also includes refineries operating at reduced rates because of the hurricane.
Ida is the ninth named storm in the hurricane season in the Atlantic this year and has seen staff evacuated from the platform as a critical safety measure.
With the storm moving inland, it has now weakened into a Category 1 hurricane and has since dropped to tropical storm status shifting the market’s attention to when refiners can restart and produce fuels.
As a result of the development, the price of Brent crude rose by 0.72 per cent or 52 cents to sell at $73.27 per barrel while the West Texas Intermediate (WTI) moved up by 39 cents or 0.57 per cent to trade at $69.13 per barrel.
Crude prices also got support yesterday and could rise further if the Organisation of the Petroleum Exporting Countries and allies (OPEC+) stops adding barrels to global supply.
This is a possibility as the Kuwaiti oil minister, Mr Mohammad Abdulatif al-Fares, said the 23-man alliance can take the step as the markets are slowing due to the Delta variant of the coronavirus.
“Since COVID-19 has begun its fourth wave in some areas, we must be careful and reconsider this increase. There may be a halt to the 400,000 barrels per day increase,” he said.
OPEC+ had agreed to boost oil production by 400,000 barrels per day every month beginning August until the group’s combined output reached pre-agreement levels towards the end of next year.
However, now that demand concerns are once again coming to the fore, OPEC+ is signalling that it is always ready to change and this will be discussed at the meeting scheduled for September 1.
