Report Summary
Trend Rating: Crude Oil: Shock
Report Date: August 30, 2021
★Category 4 hurricane “Ida” will affect oil and gas production and refinery operations in the U.S. Gulf of Mexico
The impact of hurricanes on Crude oil production and refinery operations in the Gulf of Mexico are affected. Based on past experience, offshore crude oil production platforms are usually expected to be fully restored within two weeks after a hurricane makes landfall. The greatest impact on refinery crude throughput typically occurs in the second week after a hurricane makes landfall, and the recovery of refinery operations is significantly slower than the recovery of offshore crude oil production platforms, mainly due to the longer flooding and power outages caused by severe hurricanes. time to recover, which will have a long-term impact on refinery operations. Hurricane Laura, which hit the Gulf of Mexico at the end of August 2020, caused crude oil production to drop by 1.1 million barrels per day in a single week. The crude oil processing volume of the PADD 3 refinery dropped by a peak of 1.9 million barrels per day in a single week. Due to the impact of the COVID-19 epidemic , Refinery crude oil processing volume did not return to the level of mid-August until early December. At the end of August 2017, Hurricane Harvey caused the crude oil processing volume of the PADD 3 refinery to drop to a peak of nearly 3.6 million barrels per day. Due to the impact of seasonal maintenance of the refinery, the crude oil processing volume of the refinery was also lower than before the hurricane for a long time. Until mid-November. The decline in refinery operating rates has caused a periodic impact on the supply of refined petroleum products. Usually, the evacuation of residents in affected areas a few days before a hurricane makes landfall will cause a rapid increase in gasoline demand, resulting in a decrease in PADD 3 gasoline inventories, and the gasoline crack price difference may therefore It surged higher and fell back. This trend occurred after Hurricane Harvey, but after Hurricane Laura, this trend was not obvious due to the impact of the epidemic on demand. This time, the cracking price difference of Hurricane Ida may also be affected. Suppression of the epidemic.
★Investment Suggestions
Oil prices have rebounded sharply after experiencing continuous declines. At the macro level, the Fed’s dovish stance has led to the weakening of the US dollar and its impact on oil prices. form support. After the end of the summer travel peak in the United States, there is a certain marginal weakening trend in road fuel demand, and the recovery of jet fuel demand in Europe and the United States has slowed due to the spread of mutated viruses. However, the recovery of terminal demand after the current epidemic in China is brought under control will provide some support for prices. Short-term U.S. supply disturbances are also supportive of oil prices, but supply disturbances are expected to be short-term phenomena. Refinery operations are affected by hurricanes and the epidemic, resulting in uncertainties in the demand outlook. In addition, OPEC+ will hold a new meeting in early September. Oil prices have been volatile recently, but this may not change the pace of gradual production increase.
★Risk Warning
The return of U.S. supply is faster than expected.
Full text of the report
1 Level 4 Hurricane “Ida” will affect oil and gas production and refinery operations in the U.S. Gulf of Mexico
Hurricane “Ida” became the first severe hurricane to hit the U.S. Gulf of Mexico in 2021, which has There is a short-term impact on local oil and gas production and refinery operations. According to the hurricane forecast, “Ida” strengthened as it moved into the Gulf of Mexico. The higher water temperature and upper-level winds in the Gulf of Mexico were beneficial to the strengthening of “Ida.” “Ida” upgraded to a Category 4 hurricane on the afternoon of the 29th local time, made landfall in southeastern Louisiana, and continued to move toward the eastern United States.
Oil and gas producers in the Gulf of Mexico had begun to shut down offshore oil and gas production platforms before the hurricane. According to the U.S. Bureau of Safety and Environmental Enforcement (BSEE), 95.65% of the U.S. Gulf region’s Crude oil production is approximately 1.74 million barrels per day. In addition to the production platform, crude oil transportation at LOOP Port was also suspended due to the hurricane. In terms of onshore refining facilities, approximately 4.4 million barrels/day of refining capacity are within the forecast path area of Hurricane Ida, involving 1.4-1.6 million barrels/day of gasoline supply and 1.1-1.3 million barrels/day of refined oil supply. . ExxonMobil is currently reducing production capacity at its Baton Rouge, Louisiana refinery to 50% and shutting down its gasoline unit. Phillips 66 and Shell have also closed local refineries in Louisiana.
The hurricane has an impact on crude oil production and refinery operations in the Gulf of Mexico. Based on past experience, Usually after a hurricane makes landfall, offshore crude oil production platforms are expected to be fully restored within two weeks. The greatest impact on refinery crude throughput typically occurs in the second week after a hurricane makes landfall, and the recovery of refinery operations is significantly slower than the recovery of offshore crude oil production platforms, mainly due to the longer flooding and power outages caused by severe hurricanes. time to recover, which will have a long-term impact on refinery operations. Hurricane Laura, which hit the Gulf of Mexico at the end of August 2020, caused crude oil production to drop by 1.1 million barrels per day in a single week. The crude oil processing volume of the PADD 3 refinery dropped by a peak of 1.9 million barrels per day in a single week. Due to the impact of the COVID-19 epidemic , Refinery crude oil processing volume did not return to the level of mid-August until early December. At the end of August 2017, Hurricane Harvey caused the crude oil processing volume of the PADD 3 refinery to drop to a peak of nearly 3.6 million barrels per day. Due to the impact of seasonal maintenance of the refinery, the crude oil processing volume of the refinery was also lower than before the hurricane for a long time. Until mid-November. The decline in refinery operating rates has caused a periodic impact on the supply of refined oil products. Usually, the evacuation of residents in the affected areas a few days before a hurricane makes landfall will cause a rapid increase in gasoline demand, leading toAs a result, PADD 3 gasoline inventories fell, and the gasoline crack price spread may rise and fall. This trend occurred after Hurricane Harvey, but after Hurricane Laura, this trend was not obvious due to the impact of the epidemic on demand. Sub-Hurricane Idai crack spreads may also be dampened by the pandemic.
2 Investment advice
Oil prices have rebounded sharply after experiencing continuous declines. At the macro level, the Fed’s dovish stance has led to a weakening of the US dollar, which has provided support to oil prices. After the end of the summer travel peak in the United States, there is a certain marginal weakening trend in road fuel demand, and the recovery of jet fuel demand in Europe and the United States has slowed due to the spread of mutated viruses. However, the recovery of terminal demand after the current epidemic in China is brought under control will provide some support for prices. Short-term U.S. supply disturbances are also supportive of oil prices, but supply disturbances are expected to be short-term phenomena. Refinery operations are affected by hurricanes and the epidemic, and the outlook is still uncertain. In addition, OPEC+ will hold a new meeting in early September. Oil prices have been volatile recently, but this may not change the pace of gradual production increase.
3 Risk warning
The return of U.S. supply is faster than expected. </p
