Battered by coronavirus, US oil now braces for Hurricane Laura

The United States energy industry on Tuesday was preparing for a major hurricane strike, cutting crude production at a rate approaching the level of 2005’s Hurricane Katrina and halting oil refining at plants along the Texas/Louisiana coast.

Officials in the two states called for hundreds of thousands of people to evacuate as Hurricane Laura intensified and forecasters predicted it would become a major hurricane with sustained, 115-mile-per-hour (185kph) winds.

The intensification will bring at least a 10-foot (3-metre) storm surge to the upper Texas coast later this week and could produce a devastating category-4 hurricane, said Chris Kerr, a meteorologist at agriculture, energy and weather data provider DTN.

Oil producers on Tuesday had evacuated 310 offshore facilities and shut 1.56 million barrels per day (bpd) of crude output, 84 percent of Gulf of Mexico’s offshore production, near the 90 percent outage that Katrina brought 15 years ago.

The storm will make landfall by early Thursday in an area that accounts for more than 45 percent of total US petroleum refining capacity and 17 percent of oil production, according to the Energy Information Administration.

Refiners that produce petrol and diesel fuel were taking steps to halt eight coastal facilities with nearly 2.78 million bpd of processing, 14.6 percent of the US total capacity, according to Reuters News Agency tallies.

The impact on refineries so far is less than Hurricane Harvey, whose drenching rains took down nearly one-quarter of US refining capacity three years ago.

US petrol futures have jumped as much as 10 percent since Friday, while crude benchmarks settled at a five-month high on Tuesday due to the shutdowns.

“There will be a significant storm surge from Galveston (Texas) to the Sabine River,” an area encompassing some of the region’s largest refineries, said DTN’s Kerr. “There are ideal conditions in central and west Gulf for rapid intensification.”

Officials in several Texas and Louisiana communities called for mandatory evacuations affecting half a million people. Residents from areas of Houston to Orange, Texas, should flee the area and seek shelter inland, Texas officials said.

Cheniere Energy Inc, the largest US exporter of liquefied natural gas, evacuated staff and suspended operations at its Sabine Pass LNG export terminal on the Texas/Louisiana border.

Motiva Enterprises, Total SA and Valero Energy began cutting operations at their Port Arthur, Texas, refineries, according to people familiar with the matter.

Total, Motiva and Valero confirmed the shutdowns, and a Valero spokeswoman said it also was reviewing the risks to its Texas City, plant southeast of Houston.

Citgo Petroleum said it has begun to halt processing at its 418,000-bpd refinery in Lake Charles, Louisiana.

Exxon Mobil Corp also began shutting production at its large Beaumont, Texas, refinery and reduced output at its Baytown, Texas, plant in advance of a possible shutdown.

Exxon confirmed it was initiating a shutdown at Beaumont and was preparing for possible severe weather at its Baytown refinery and chemical complex, a spokesman said. If the Baytown plant fully halts processing, total shutdowns along the coast would hit 2.78 million bpd.