Fingers crossed in U.S. oil sector as storm passes
Monday September 1, 2:52 pm ET
HOUSTON (Reuters) – Energy companies waited anxiously on Monday as Hurricane Gustav lurched across the nation's largest concentration of oil platforms and refineries in the biggest threat to fuel supplies since 2005.
Nearly all of the oil and gas production in the Gulf of Mexico and more than a quarter of U.S. refining capacity was shut or slowed down as a precaution by the time Gustav made landfall near New Orleans on Monday morning.
But energy experts were hopeful the storm would cause less damage to infrastructure than Hurricanes Katrina and Rita, which three years ago destroyed more than 100 offshore oil platforms and closed several large refineries for months.
"The storm has been downgraded and it looks like the main portion of the refinery district is going to escape a significant hit," said Jim Ritterbusch of Ritterbusch and Associates in Galena, Illinois.
U.S. crude oil fell nearly 4 percent while natural gas futures were down more than 5 percent.
Gustav weakened into a Category 2 hurricane on the five-step Saffir-Simpson scale, with winds of 110 mph before hitting the coast near Port Fourchon, a key logistical port that supports 75 percent of Gulf of Mexico oil and gas drilling operations.
U.S. forecasters warned that Gustav will bring an "extremely dangerous storm surge" of up to 14 feet that could test levies in low-lying areas. But a surge of that size would be only half of that caused by Katrina, which flooded New Orleans in 2005.
Energy companies are unlikely to have much information about the condition of offshore platforms until surveillance flights can be launched once Gustav has passed.
"It's going to be a couple of days for checks at any of the production facilities," Chevron spokesman Mickey Driver said. "We've got to let them get out there and we're not going to rush things."
The Gulf of Mexico accounts for about a quarter of U.S. oil production and 15 percent of its natural gas production, and refineries along the coast produce more than a third of the nation's fuel.
The U.S. government said it was ready to release crude oil stocks from the nation's emergency reserve if Gustav causes a significant disruption, and it waived environmental quality standards for gasoline in Texas and Louisiana to ensure adequate retail supplies.
Louisiana Gov. Bobby Jindal on Monday called on the federal government to release emergency crude oil supplies as Gustav lashed the coast.
The foul weather forced shut several key waterways along the coast and triggered the shutdown of the Louisiana Offshore Oil Port, a major conduit for U.S. crude imports.
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