Natural-gas futures rallied to their highest finish since 2014 on Wednesday and oil prices also climbed, with both commodities finding support on a sluggish return of energy output in the Gulf of Mexico in the wake of Hurricane Ida.
“It’s clear that the storm was one of the most damaging on record for offshore oil and gas production, as well as import/export terminals and refineries in Louisiana,” said Robbie Fraser, global research & analytics manager at Schneider Electric, in a market update.
On Wednesday afternoon , the Bureau of Safety and Environmental Enforcement estimated that nearly 77% of Gulf of Mexico oil production and more than 77% of natural-gas output remains shut-in following Hurricane Ida, a deadly and powerful storm that made landfall on the Louisiana Gulf Coast on Aug. 29.
Personnel are still evacuated from 73 production platforms, which account for about 13% of the manned platforms in the Gulf, the BSEE said.
That’s “expected to contribute to strong crude and product draws” in coming data from trade group the American Petroleum Institute, and the U.S. Energy Information Administration, said Fraser. “The first glimpse of that impact should come this week,” he said.
The EIA will release its weekly petroleum supply data on Thursday, a day later than usual due to Monday’s labor Day holiday. It’ll also release weekly natural-gas supply report as usual on Thursday. The API’s oil data will be out late Wednesday.
West Texas Intermediate crude for October delivery
CL00,
CLV21,
rose 95 cents, or 1.4%, to settle at $69.30 a barrel on the New York Mercantile Exchange, marking the first gain in three sessions. November Brent crude
BRN00,
BRNX21,
the global benchmark, added 91 cents, or 1.3%, at $72.60 a barrel on ICE Futures Europe.
October natural gas NGV21, meanwhile, rose 35 cents, or 7.6%, to settle at $4.914 per million British thermal units on Nymex. Front-month prices settled at their highest since February 2014, according to Dow Jones Market Data.
Ida’s damage to U.S. offshore energy production is one of the most costly since back-to-back storms in 2005 cut output for months, Reuters reported Tuesday, citing the latest data and historical records.
“So far Hurricane Ida has resulted in 19.2 million barrels of production being lost, and with output still set to take a while to recover, these losses will only grow. Refinery operations appear to be making a quicker recovery,” said Warren Patterson, head of commodities strategy at ING, in a note, observing that just five refineries remain closed.
“These temporary closures amount to 1 million barrels a day of capacity, down from a peak of more than 2 million barrels a day. However, those refiners that have restarted are unlikely to be operating at full capacity at the moment,” he said.
On average, analysts expect the EIA on Thursday to report a decline of 7.4 million barrels in U.S. crude-oil stocks for the week ended Sept. 3, according to a survey conducted by S&P Global Platts.
They also forecast supply declines of 2.4 million barrels for gasoline and 2 million barrels for distillates, while refinery utilization is expected to drop by 5.7 percentage points to 85.6%.
In a separate monthly report released Wednesday, the EIA lowered its 2021 forecasts for global oil demand growth and U.S. production, as well as WTI prices.
Back on Nymex, October gasoline
RBV21,
tacked on 0.1% to $2.13 a gallon and October heating oil
HOV21,
added 0.7% to $2.14 a gallon.
In its monthly report, the EIA lifted its forecast for natural-gas spot prices this year by 6% to $3.63 per million Btus and next year by 12.7% to $3.47.
Ida “affected natural gas production at a time that the United States was already experiencing higher natural gas prices due to growth in exports, strong domestic natural gas consumption, and relatively flat natural gas production,” said EIA Acting Administrator Steve Nalley, in a statement.
U.S. natural-gas supplies last week likely rose by about 39 billion cubic feet and if confirmed by the EIA in Thursday’s report, that would be 26 bcf less than the five-year average rise for the same week, said Christin Redmond, global commodity analyst at Schneider Electric. That would cause the “overall storage deficit to increase further.”
“Given ongoing production outages, mixed with a return of hotter temperatures, injections for the remainder of the month may be feeble as well,” she said.
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