Stormy Relationship: Marco And Laura

Marco and Laura may have never met, but their stormy relationship is going to hit you at the gas pump.  

Tropical storm Marco has been downgraded to a depression, but hurricane Laura could turn out to be a monster. The possibility of hurricane Laura perhaps reaching a category storm rating is going to extend oil production and refining disruptions in the Gulf of Mexico. So far 82% of oil production has been shut in the Gulf, and major refineries are being closed, taking offline over 1.0 million barrels a day of refining capacity. Motiva Enterprises LLC, the countries largest refinery and Valero Energy Corp., has shutdown. While oil prices have been subdued because more U.S. production is on land, concerns about products are acute, with prices spiking to pre-coronavirus price levels.

Natural gas is also spiking, hitting nine-month highs as strong demand and production shutdowns are tightening supply. There is potential for power outages and rains bringing cooler temperatures. However, the markets are still worried about the shift from an oversupplied market to an undersupplied market. The trend in gas has changed as this reality starts to get priced in. The BSEE says that 56.92% of natural gas production in the Gulf of Mexico is shut-in.

U.S. imports and exports are also going to be diverted, causing price movement in spreads in Europe. Gasoline from Europe to the U.S. will slow adding to U.S. price woes. The BSEE reports that based on data from offshore operators, personnel has been evacuated from a total of 281 production platforms, 43.7 percent of the 643 manned platforms in the Gulf of Mexico. Production platforms are the structures located offshore from which oil and natural gas are produced. Unlike drilling rigs, which typically move from location to location, production facilities remain in the same location throughout a project’s duration. Personnel has been evacuated from six rigs (non-dynamically positioned), equivalent to 60 percent of the 10 rigs of this type currently operating in the Gulf. Rigs can include several types of offshore drilling facilities including jack-up rigs, platform rigs, all submersibles, and moored semi-submersibles.

A total of 11 dynamically positioned rigs have moved off location out of the storms’ projected paths as a precaution. This number represents 68 percent of the 16 DP rigs currently operating in the Gulf. Dynamically positioned rigs maintain their location while conducting well operations by using thrusters and propellers. These rigs are not moored to the seafloor; therefore, they can move off location in a relatively short time frame. Personnel remain on-board and return to the location once the storm has passed.
Big oil is not big anymore. Exxon Mobil has been kicked out of the Dow Jones average. Exxon was part of the Dow from the beginning. Nothing is forever. Like obscene profits. Those were the days.