U.S. production and refinery throughput along the U.S. Gulf Coast has climbed over the last week, as producers and refiners rush to return facilities shut during Hurricane Laura.
According to the U.S. Bureau of Safety and Environmental Enforcement (BSEE), around 0.301 MMBbl/d or 16.27% of crude oil production remains shut-in. At its peak, 1.559 MMBbl/d in output had been shut-in as Hurricane Laura neared landfall.
The chart above shows that the producers responded first, before the refineries, last week. The early production losses may have contributed to the small rally that occurred in the days preceding Hurricane Laura’s landfall. The hurricane did not make reach the Louisiana coast until August 27, 2020.
Many refineries shut down on August 25, 2020, approximately two days before Hurricane Laura made landfall. Nearly 2.5 MMBbl/d of refining capacity was offline ahead of Hurricane Laura.
The EIA reported that U.S. refinery utilization rates fell by 5.3 percentage points to 76.7% of total capacity last week. The decrease in PADD 3 (USGC) refining activity was behind the sizeable weekly shift.
Since then, companies have provided updates regarding the duration of the expected outages. Oil and Gas producers and refiners have yet to announce any significant damage, although flyovers and walkthroughs to assess conditions are still happening.
In the latest announcements, Valero (250 MBbl/d) and Total (185 MBbl/d) said that they expect their refineries in Port Arthur to resume limited operations on Monday, September 7, 2020. ExxonMobil expects that its 369 MBbl/d Beaumont, TX refinery would be brought back online on Friday, September 4, 2020.
The only area that seemed to have sustained significant damage was Lake Charles, Louisiana. Utility provider Entergy said it might take several weeks to get power back in the Lake Charles area, where Phillips 66 (260 MBbl/d) and Citgo (480 MBbl/d) have refineries.
The production/refining outage imbalance seems to have gone slightly bullish recently, with production outages now topping refinery outages. The discrepancy is small. Still, prices have declined this week as other factors such as a strengthening dollar and concerns of a global demand slowdown weigh on oil prices.