Oil Futures Slip as Ports Reopen

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON(DTN) -- Heading into the three-day Labor Day holiday weekend, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange declined in afternoon trade Friday, holding the U.S. crude benchmark below $70 per barrel (bbl) following media reports indicating operations at Port Fourchon -- a critical hub for Gulf of Mexico oil producers -- partially restarted, raising hope shut-in offshore crude output would begin to rebound following a destructive Hurricane Ida.

News that damages to Port Fourchon, which sits at the southeast tip of Louisiana, was less than initially assessed joined a disappointing reading on the domestic labor market to send oil contracts lower in afternoon trading Friday.

Multiple reports citing the U.S. Coast Guard this morning indicate Port Fourchon and the Port of Houma in southern Louisiana reopened Thursday night with restrictions after Hurricane Ida forced nearly weeklong shutdowns. The Department of Energy also shows Louisiana ports in New Orleans, Morgan City, Grammercy and Baton Rouge are opened with restrictions, with normal conditions at Lake Charles.

Port Fourchon is particularly critical for offshore oil producers as it serves as a key transportation artery in delivering oil onshore. Analysts estimate about 90% of Gulf of Mexico oil production goes through the port.

As of Friday afternoon, about 1.7 million barrels per day (bpd) or 93% of that oil output was still shuttered while 133 offshore oil platforms out of 560 in the Gulf remain evacuated. According to Baker Hughes, the number of operating oil-directed drilling rigs in the United States fell 16 to a 394 four-week low today from a week ago, with the weekly decline the most since early June 2020.

Six refineries in Louisiana with capacity of 1.6 million bpd remain shut, accounting for 9% of the total U.S. capacity. ExxonMobil's 520,000 bpd Baton Rouge refinery is restarting, with the refiner on Thursday securing 1.5 million bbl of crude oil from the Strategic Petroleum Reserve. Placid Oil's 75,000 bpd Port Allen refinery is also restarting, with both refineries not expected to reach full rates for several days.

The Louisiana Offshore Oil Port, the largest privately owned crude export and import terminal in the United States, remained closed, according to the DOE.

Separately, Department of Labor reported this morning U.S. employers added 235,000 jobs in August, falling far short of economist estimates for 720,000. The slowdown in hiring comes as the Delta variant of coronavirus surges through the country, depressing consumer spending and confidence in the economy. Job growth last month was particularly sluggish in the service sector that involve in-person interaction. Employment in leisure and hospitality held steady after adding an average of 350,000 jobs a month over the previous six months. Retailers cut jobs in August.

U.S. President Joe Biden in comments addressing the disappointing employment report said "the economy and the job market in the United States can withstand the ups and downs of the delta COVID-19 variation. The United States has to make more effort in combating the delta variant."

Hospitals across the country are struggling to keep up with the surge of COVID cases. In Maine, there are only 40 intensive care unit beds available in the entire state, with most cases are among unvaccinated. Centers for Disease Control and Prevention data shows seven-day moving average of new cases averaged 152,546 last week, up from just under 100,000 a month ago.

On the session, the NYMEX October West Texas Intermediate contact declined $0.70 to settle at $69.29 bbl, and Brent crude for November delivery fell to $72.61 bbl, down $0.42. NYMEX October RBOB futures declined 0.95 cents to $2.1540 gallon, and front-month ULSD futures weakened to $2.1594 gallon.

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

Liubov Georges