DTN Oil

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent traded on the Intercontinental Exchange settled Wednesday's session higher, with both the U.S. and international crude benchmarks rallying as much as 1.5%. The gains followed reports of widespread protests at oil ports in Libya, with demonstrators blocking loadings from the two key terminals of Ras Lanuf and Es Sider, while the slower-than-expected return of deep-water oil production in the U.S. Gulf of Mexico fueled additional buying interest.

The Bureau of Safety and Environment Enforcement reported Wednesday afternoon operators in the federal waters of the Gulf of Mexico brought back less than 2% of shut-in production on Wednesday, with some 1.4 million barrels per day (bpd) in regional oil output remaining offline following Hurricane Ida's landfall on Aug. 29. A combination of factors has likely contributed to the slow progress in restoring GOM production, including potential damage to underwater pipelines and widespread power outages at refineries and oil terminals across southeastern Louisiana that could preclude the facilities from receiving oil.

Shell, the largest producer in the Gulf, said on Wednesday that 80% of its production remains offline and return is contingent on "availability of downstream infrastructure." "Our remaining Shell Deep Water assets -- Appomattox, Mars, Olympus, Ursa, Auger and Enchilada/Salsa -- remain shut in. Our inspections on board confirm that there is no significant structural damage to these Shell Deep Water assets impacted by the storm. Our crews will focus on making necessary repairs in a safe, sustainable manner," said the company.

Many offshore operators have been able to return some personnel to platforms, with 73 remaining evacuated, about 13% of all platforms in the Gulf, according to the BSEE data.

S&P Global Platts Analytics estimates Ida has already kept about 20 million barrels (bbl) of oil off the market, which makes it the costliest hurricane in the GOM since hurricanes Katrina and Rita in 2005. Should recovery from Ida extend into next week, the disruption could knock off as much as 30 million bbl.

In its latest Short-term Energy Outlook, U.S. Energy Information Administration said it doesn't expect a speedy return of GOM output, with production to average 1.2 million bpd in September before jumping back to 1.7 million bpd in the fourth quarter.

Wednesday afternoon, oil traders also positioned ahead of weekly inventory data from the American Petroleum Institute, delayed a day due to the Labor Day holiday in the United States.

Commercial crude oil inventories are likely to have declined by 2.5 million bbl in the week ended Sept. 7, with estimates ranging from a decline of 11 million bbl to an increase of 4 million bbl. Gasoline stockpiles are expected to have fall by 2.9 million bbl from the previous week. Stocks of distillates are expected to have been drawn down by 2.3 million bbl from the previous week. Refinery run rates likely fell by 4.4% to 86.9% of U.S. capacity.

U.S. Department of Energy said on Wednesday that five refineries in Louisiana with roughly 1 million bpd of oil refining capacity, or about 6% of nationwide capacity, remained shut, with all three refineries in the Baton Rouge area and one near New Orleans having initiated the restart process.

Internationally, Libya's two key oil ports -- Es Sider and Ras Lanuf -- were closed Wednesday due to escalating demonstrations that blocked a crude tanker from loading its cargo. It's unclear what sparked the protests, but media reports indicate demonstrators are calling for the dismissal of Mustafa Sanalla, chairman of state-owned National Oil Company.

A third set of demonstrations also broke out at the port of Tobruk, whose gate also serves the nearby Marsa el-Hariga terminal. NOC has yet to declare force majeure on crude exports from any of its ports.

The latest Monthly Oil Market Report from the Organization of the Petroleum Exporting Countries pegged Libya's oil production at 1.165 million bpd, up from 911,000 bpd in the fourth quarter of 2020.

At settlement, the NYMEX October West Texas Intermediate contract jumped $0.95 to $69.30 bbl, and Brent crude for November delivery advanced $0.91 to $72.60 per bbl. NYMEX October RBOB futures settled the session modestly higher at $2.1321 gallon, and front-month ULSD futures advanced 1.48 cents to $2.1364 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com