Oil Futures End Higher on Ida Shutdowns, OPEC-Plus in Focus

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- After trading in a wide range on the session, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Monday's session higher, with the September RBOB contact gaining 1.5%. Traders sought out damage assessments from oil producers and refiners in the Gulf Coast region following Sunday's Louisiana landfall of a powerful Category 4 Hurricane Ida, with DTN confirming about 2.2 million barrels per day (bpd) of refining capacity in the region being taken offline.

The disruptions come ahead of looming expirations by the September RBOB and ULSD contracts and October Brent contract Tuesday afternoon.

NYMEX September RBOB futures settled up 3.85 cents at $2.3127 per gallon after nearing July's $2.3695 high overnight, with the October contract widening its discount to 15.89 cents per gallon against the expiring contract. September ULSD futures settled at $2.1403 gallon, up 3.11 cents on the session, with the next-month delivery October contact finishing at a 25-point discount. NYMEX October West Texas Intermediate futures settled $0.47 higher at $69.21 per barrel (bbl), while ICE October Brent settled at $73.41 per bbl, up $0.71 on the session, and ending at a $1.18 premium to November delivery.

According to DTN estimates, 2.2 million bpd of Louisiana refinery capacity was shut down as of Monday afternoon, including Marathon's 578,000-bpd refinery in Garyville, ExxonMobil's 520,000-bpd facility in Baton Rouge and Valero's St. 340,000-bpd refinery complex in St. Charles among others. A total of the seven largest refineries in the region confirmed closure or reduced operations in the aftermath of Hurricane Ida. ExxonMobil said Monday it was shutting down all units at its 520,000-bpd Baton Rouge refinery after running at reduced rates "to stabilize operations," which includes securing feedstock. The company said Hurricane Ida did not cause "any significant damage" to the refinery. It remains unclear as to when refineries will be able to bring shuttered capacity online with about 2,000 miles of transmission lines feeding the city of New Orleans remaining out of service, according to Ent energy.

"The catastrophic damage of the storm that hung over west of here caused a lot of damage to the transmission lines that feed New Orleans," Deanna Rodriguez, president and CEO of Entergy New Orleans, said Monday.

Additionally, Colonial Pipeline told shippers it "temporarily" shut Lines 1 and 2 on its system after Hurricane Ida made landfall Sunday, with the two main lines running parallel from Houston to Greensboro, North Carolina. Line 1 on the Colonial system is a 1.4 million-bpd mainline carrying gasoline, and Line 2 is a 1.2 million-bpd distillate line. Both pipelines pass through Baton Rouge, where there are storage terminals. In shutting the pipelines, Colonial told shippers fuel supply is available throughout the southeast through the numerous terminals along the pipeline route.

Ida has also taken offline about 94.6% or 1,721,809 bpd of Gulf of Mexico oil production, just slightly lower than 95.65% a day ago. Based on data from offshore operator reports, personnel have been evacuated from a total of 288 production platforms, 51.43% of the 560 manned platforms in the GOM, up from 279 the day prior. Production platforms are the structures located offshore from which oil and 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.

Despite the recent price volatility, the Organization of the Petroleum Exporting Countries and Russia-led allies are expected to press on with their planned increase in oil production when they meet on Wednesday, Sept. 1, according to the source familiar with the talks. OPEC+ is set to boost collective oil supplies by 400,000 bpd each month until December 2022. Kuwait oil minister Mohammad al-Fares on Sunday told reporters that he supports the planned rollover of cuts discussed despite the resurgent Delta variant of coronavirus in the number of Asian economies that economies. U.S. President Joe Biden's administration has urged OPEC and its allies to boost oil output to tackle rising gasoline prices that it views as a threat to the global economic recovery.

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

Liubov Georges