There aren’t many official announcements, but the buzz in the oil industry is that Hurricane Laura might lead to only one significant extended closure in the refining sector.
A report that appeared to have originated with Bloomberg is that the Citgo refinery in Lake Charles, Louisiana, near where Hurricane Laura made landfall, might need to stay closed for several weeks.
“Refineries in Lake Charles seem to have been the worst hit, with reports that Citgo’s 418,000 b/d Lake Charles refinery could be shut for four to six weeks in order to repair the
damage,” according to a report issued by ING and quoted by S&P Global Platts.
But there are no other firm reports on damage sustained at the refinery and several stories about refineries coming back have said Citgo has not issued a comment. The suggestion about Citgo’s refinery being down also appears to have come from a single Bloomberg story.
A graphic posted by S&P Global Platts had the Citgo Lake Charles refinery listed as “assessing damage.” That is the same description it had for Phillips66’s 249,000 b/d refinery in Lake Charles.
But four other refineries in the region — Motiva Port Arthur, Valero Port Arthur, Total Port Arthur and ExxonMobil in Beaumont, all of which are across the state line in Texas — were listed as “preparing for restart.”
The end result for the diesel market as a result of Hurricane Laura is that on a commodity basis, the price of ultra low sulfur diesel on the CME exchange settled Friday at $1.2162/gallon, down 3.14 cts from where it settled Monday. Even at its highest point in anticipation of the storm, it settled Tuesday at $1.2601/g.
The muted reaction remains mostly based on the continued overhang of U.S. diesel inventories. As FreightWaves has noted previously, days’ cover of supplies of all distillates, but mostly diesel, only recently dropped to less than 50 days after being a stretch in which it had been above that level for eight out of nine weeks. In the history of the series from the Energy Information Administration going back to the early ’90s, it hadn’t been above 50 days that many times in total.
A significant upturn in wholesale diesel prices in Houston earlier in the week also reversed course on Friday. According to data in SONAR, that number fell Friday to $1.33/gallon, down 1.8 cts from the prior day. It had been at $1.272/gallon at the start of the week.
One unknown in the market is the status of crude oil production in the Gulf of Mexico and whether platforms suffered any significant damage. That sort of review takes longer as crews need to fly over the facilities as a first step.
The Bureau of Safety and Environmental Enforcement reported Friday that 1.559 million b/d of Gulf of Mexico production was offline, 84.3% of capacity. That figure was unchanged from the prior two days.