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Tom Kool

Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

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Hurricane Laura Makes Landfall In Oil Heartland

Laura made landfall as a Category 4 hurricane in southwestern Louisiana near Cameron, with wind speeds reaching 150 mph and torrential rains drowning the coastal line.

Ahead of Laura’s landfall, oil producers in the Gulf had shut in more than 84 percent of oil production and more than half of gas production. The oil output shut-in stands at 1.558 million bpd, and the gas output shut-in stands at 1.65 billion cu ft daily. Refiners were also shutting down and bracing themselves for the impact.

“These hurricanes, they can attack the entire energy infrastructure,” Jim Burkhard, head of IHS Markit oil market research, told the AP. “And it’s not just a refinery being shut down, but if a pipeline gets shut down, or the electrical grid gets damaged, it shows how integrated all these systems are: pipelines, refineries, electricity. And it’s that aggregate damage that can be so challenging to overcome.”

The silver lining in all this potential destruction would be an oil price jump, but this has failed to materialize for more than a few hours after every pessimistic hurricane update over the past few days. According to experts cited by the AP, the likelihood of serious oil or gasoline shortages as a result of the hurricane is slim, since there is enough oil and fuel in storage in other parts of the United States.

Some believe that the tightening of both oil and gasoline inventories over the past few weeks could, combined with the hurricane, lead to some supply disruptions. However, both crude oil and gasoline stockpiles, according to the Energy Information Administration, are above the five-year average for this time of the year, so the supply disruption possibility is quite a distant one, unless the disruptive effects of Laura, such as floods, linger for longer, as it happened with Hurricane Harvey in 2017.

By Tom Kool for Oilprice.com

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