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Tropical Storm Sally Forces Drillers To Evacuate Gulf Of Mexico Oil Platforms

Oil companies have started evacuating staff and shutting in oil production at about half a dozen platforms in the Gulf of Mexico ahead of tropical storm Sally, which is expected to make landfall in Louisiana as a hurricane.

According to Reuters, BP, Equinor, Chevron, and Murphy Oil are the companies that shut in production, while Shell suspended some drilling operations yesterday but has not made changes to production.

Philips 66 shut down a 255,600-bpd refinery in Alliance, Louisiana, as it was close to the forecast route of the storm. According to the National Hurricane Center, Sally will make landfall tomorrow.

The new hurricane threat comes less than a month after Hurricane Laura forced the oil industry to shut in more than 84 percent of oil production in the Gulf and more than half of gas production. The oil shut-ins accounted for output of over 1.55 million bpd and helped push benchmark prices to the highest since March. Normally, Gulf of Mexico production accounts for about 17 percent of the U.S. total in oil and 5 percent of the total gas production in the country.

For now, the Bureau of Safety and Environmental Enforcement has not released an update about the amount of oil production affected by shut-ins but it will likely release one later today. It may help prices, which have recently suffered a string of losses as pessimism about the recovery in oil demand deepens. Earlier today, BP contributed to the sentiment, by saying in an advance release of its Energy Outlook report that it was very likely demand would never recover to pre-pandemic levels.

At the time of writing, both West Texas Intermediate and Brent crude were trading below $40, with Brent at $39.99 a barrel and WTI at $37.56 a barrel both modestly up from Friday’s close.

By Charles Kennedy for Oilprice.com

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