A Quarter of U.S. Energy Production Shut as Hurricane Sally Inches Towards Landfall

At 1 p.m. CDT, the center of Hurricane Sally was located about 60 miles (95 km) east of the mouth of the Mississippi River and about 105 miles (165 km) south of Mobile, Alabama. Image courtesy NOAA/GOES

By Erwin Seba HOUSTON, Sept 15 (Reuters) – More than a quarter of U.S. offshore oil and gas production was shut and key exporting ports were closed on Tuesday as Hurricane Sally churned off the U.S. Gulf Coast, flooding coastal cities and pelting states with heavy rains.

Sally continued to weaken Tuesday afternoon to a Category 1 hurricane on Tuesday and largely stalled offshore with sustained winds of 80 miles per hour (128 kph). It is expected to bring life-threatening flooding through Wednesday from Mississippi to Florida, the U.S. National Hurricane Center said.

The storm’s trajectory takes it through the prime U.S. offshore production areas on a path toward western Alabama, sparing some larger Gulf Coast refineries from high winds.

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Royal Dutch Shell said it shut its Appomattox oil platform about 80 miles off the coast of Louisiana, joining BP , Chevron Corp and Equinor in closing facilities less than one month after Hurricane Laura forced up to 1.5 million barrels per day of output to close temporarily.

Nearly 500,000 bpd of offshore crude oil production and 28%, or 759 million cubic feet per day (mmcfd), of natural gas output were shut in the U.S. Gulf of Mexico, according to the U.S. Interior Department.

U.S. crude oil futures rose nearly 3% and gasoline futures climbed 2.2% on Tuesday on the hurricane-related oil production and refinery shut-ins despite demand losses from the COVID-19 pandemic.

The nation’s sole offshore terminal, the Louisiana Offshore Oil Port (LOOP), stopped loading tankers on Sunday, while ports from the lower Mississippi River east to Pensacola, Florida, were closed. That will cut off roughly 307,000 bpd of crude and 411,000 bpd of refined products, according to Kpler data.

As of 1 p.m. CDT (1800 GMT) on Tuesday, Sally was about 105 miles (165 km) south of Mobile, Alabama, and crawling toward the northwest at 2 mph (3 kph).

Refiners in the region have wound down operations. Phillips 66 shut its Alliance oil refinery, which processes 255,600 bpd at a site along the Mississippi River on the coast of Louisiana.

Shell cut production to minimum rates on Monday at its 227,400-bpd Norco, Louisiana, refinery.

However, Murphy Oil Corp said it was beginning to restore production at its eastern-most Gulf of Mexico oil platforms, and Equinor said it expected to return workers to its Titan platform on Thursday.

(Reporting by Erwin Seba, Gary McWilliams in Houston and Devika Krishna Kumar in New York; Editing by Marguerita Choy and Jason Neely)

(c) Copyright Thomson Reuters 2020.

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