Ida Effects May Linger as Output Slow to Restart

Copyright © 2021 Energy Intelligence Group

Hurricane Ida, which tore through Louisiana almost two weeks ago, has had a muted impact on oil markets so far. But with 1.4 million barrels per day of crude production still off line and no clear timeline for it to return, the effects could still be significant. The aftermath of the storm has been atypical for the US Gulf Coast oil industry, which typically sees upstream production return faster than area refineries. In all, some 20 million bbl of crude and 20 million bbl of refined products have gone unproduced thus far due to the storm. After slamming Louisiana, Ida continued northwards and eastwards, with its dregs flooding parts of New Jersey, Pennsylvania, and New York -- a premier market for gasoline. And yet markets did not respond that strongly; global benchmark Brent is less than $1 above pre-storm levels while the Nymex gasoline contract has retreated. Offshore production remains under significant pressure. Energy Intelligence estimates almost 80% is still off line, amounting to some 1.4 million b/d -- much of it the heavier, more sour grades that Gulf Coast refiners crave. As a result, Energy Intelligence now expects 2021 US production to come in 200,000 b/d below 2020 levels. Refiners have resumed operations more quickly. Ida sent some 2 million b/d in refining capacity off line ahead of landfall, but already roughly 1.3 million b/d of that is in some stage of the restart process. It will take more than a week from now for utilization to hit pre-storm levels, experts say.

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