Hurricane Rita

[clv101]

The Oil Drum blog seems very well connected. I expect they will will have the best information.

This story was on there today:
http://www.theoildrum.com/story/2005/9/ ... 2/460#more

[RevdTess]

Wasn't it already? It makes it more certain though.

I wonder how long until we get real reports of oil infrastructure damage from the area? Any thoughts Tess?

Mike

I'm as eager for reports as you are. I think I saw something via the Oil Drum about the Port Arthur refineries maybe being out for a month. I guess I'll find out more when I'm back at the office tomorrow.

The markets are totally going with the 'dodging the bullet' thing. It goes against all the fundamentals, but the people holding market positions on fundamentals are the ones who get stopped out by the traders playing psychology.

[mikepepler]

Yes, TheOilDrum is good, but a frustrating number of time zones out of sync with us in the UK. Must learn patience...

I found a bit of info here, confirms what Tess was just saying:
http://www.bloomberg.com/apps/news?pid= ... world_news

At least 15 refineries in Texas and Louisiana, accounting for about 24 percent of U.S. capacity, shut as Rita approached. Valero Energy Corp. said its Houston and Texas City plants may restore processing within seven days. Another 5 percent of the nation's refining capacity remains closed from Katrina, with four plants scheduled to resume output in November or December.

``The oil market took some relief that Rita didn't come out to be as bad as expected,'' said Anette Einarsen, an oil analyst at Nordea Bank AB in Oslo. ``There are still some concerns that with damage in Port Arthur, we might be looking at another 5 percent of U.S. refining capacity being out'' for several weeks, in addition to the 5 percent knocked out by Katrina.

Valero said it had ``significant'' damage to two cooling towers and a flare stack at its Port Arthur, Texas, refinery, although none appeared to come from flooding, a spokeswoman said yesterday. It will take two to four weeks to repair the refinery, she said. Motiva Enterprises LLC's refinery in Port Arthur was also damaged by wind, the company said. Motiva didn't say when it would restart operations.

[clv101]

Just looking at some of those numbers, 24% of capacity shut as Rita approached. Let?s say that was unscheduled so if it wasn't for Rita they would be operating. Let?s also say they will be shut for just one week. That's 2% of 24% = 0.5% of US annual production. Katrina caused a similar shut down for a short period so say that's up to 1% now. Then there's the 5% still shut from Katrina and if it's not open again until Dec that another 1.25% (0.25% of 5%) lost.

So in total the US could be down some 2.25% refining capacity over the course of the year due to these hurricanes. That seems like a lot to me, and enough to prevent US economic growth of 3.5-4% as originally forecast.

[fishertrop]

Natural gas woes bigger story than crude oil
http://www.mywesttexas.com/site/news.cf ... 4107&rfi=6

Having seen his prediction that crude oil prices would reach $65 a barrel become reality, Dr. Michael Economides is making equally bold predictions about natural gas.

Natural gas prices, he said Wednesday while visiting Midland to address the Permian Basin section, Society of Petroleum Engineers, will reach $20 per thousand cubic feet (Mcf) around Christmas.

Having forecast $65 oil, he said, he's now predicting $100 oil "but I'm not impressed with that. Natural gas is the real story."

[RevdTess]

So in total the US could be down some 2.25% refining capacity over the course of the year due to these hurricanes. That seems like a lot to me, and enough to prevent US economic growth of 3.5-4% as originally forecast.

I think you're probably better off calculating the loss in barrels of gasoline and middle distillates rather than percentages.

That way you can directly compare with other factors such as decreased oil product demand and increased product imports.

Until Rita hit, US refinery capacity was out ~800kb/d and crude production was also out ~800kb/d. That's approximately 400kb/d of gasoline production and 200kb/d of distillates like heating oil. But gasoline consumption is also way down, despite the odd spike as people run from hurricanes, and middle distillate stocks are reasonably high.

Added to that we have at least 30 cargoes of gasoline imminently arriving from Europe. So it's actually not all that clear how much of a problem these refinery outages are for the US.

DoE inventory numbers this week should tell an interesting story. After Katrina I was amazed at how little the impact seemed to be. I wonder if Rita's impact will be just as invisible.

As for what's really going on? We were already expecting an incredibly tight winter, pre-Katrina. How can it be less so now? People can cut back on gasoline use, but oil to heat their homes? That's another matter entirely.

Hurricane season doesnt end for a few weeks yet.

[andyh]

and there is another tropical depression forming to the East of the Windward islands already, its almost like a cab rank. I believe the season doesn't end until mid November does it?

I dont actually now think however that we will see much of a spike in oil prices even if we get another biggie in the GoM. Traders must presumably be running scared that the authorities would simply re-open the gates on the various strategic reserves (as they did once already), so in my view upside spikes would be capped quickly - after all its what strategic reserves are for. So its more likely IMO the price will hang around in the $60s until after the hurricane season ends. Then the authorities no longer have recourse to the blunt tool of the strategic reserve (it would take some justification to open those taps in the abscence of any obvious emergency), so I would look for the upward trend to re-assert itself after the hurricane season has ended not before.
Just my take on what may be happening.

[RevdTess]

and there is another tropical depression forming to the East of the Windward islands already, its almost like a cab rank. I believe the season doesn't end until mid November does it?

I dont actually now think however that we will see much of a spike in oil prices even if we get another biggie in the GoM. Traders must presumably be running scared that the authorities would simply re-open the gates on the various strategic reserves (as they did once already), so in my view upside spikes would be capped quickly - after all its what strategic reserves are for. So its more likely IMO the price will hang around in the $60s until after the hurricane season ends. Then the authorities no longer have recourse to the blunt tool of the strategic reserve (it would take some justification to open those taps in the abscence of any obvious emergency), so I would look for the upward trend to re-assert itself after the hurricane season has ended not before.
Just my take on what may be happening.

That seems a very wise analysis.

Hurricane season is June-October I believe, though presumably the strength of any hurricanes is likely to be less as the heat goes out of the water.

[andyh]

Yes you are right end of October seems the norm. There is a strong correlation with surface water temperatures, with a mininmum of 26.5C needed to initiate the formation - so presumably they can happen later is surface water is warmer. The site here indicates that water temps are very high at the moment and it looks like the plus 26.5C will be maintained for several weeks at least (water cools very slowly):

http://www.wunderground.com/tropical/

[skeptik]

That seems a very wise analysis.

Yup..Makes sense to me too.

Hurricane season is June-October I believe, though presumably the strength of any hurricanes is likely to be less as the heat goes out of the water.
End of October, that is

Hurricane season is (officially) from June 1 to Nov 30.

Hurricanes can form where where the sea surface temperature is 82F or higher. At the moment the surface temp of the Carribean and Gulf of Mexico is about 88-90F. Unusually warm.

It's not over till the fat lady sings...

An accurate prediction from NOAA ...
http://www.cnn.com/2005/WEATHER/05/16/h ... index.html'

[grinu]

http://www.leadingthecharge.com/stories ... 77250.html

Oil industry weighs Rita damage
Staff and agencies
25 September, 2005

NEW YORK, September 25 - The U.S. oil industry rushed to check its refineries and offshore oil platforms over the weekend in the wake of Hurricane Rita, with early indications that the second major storm to hit the area in a month was less damaging than initially feared.

Rita, which plowed through a concentration of platforms before making landfall well east of Houston?s refining hub, shut 100 percent of Gulf of Mexico crude oil production and 30 percent of U.S. refinery production along the coast.

But government officials and companies showed hope that Rita left refiners and offshore crude and natural gas producers with little lasting damage -- particularly compared to last month?s Hurricane Katrina.

"It appears the refining industry, the oil and gas industry (suffered) a glancing blow at worst. Hopefully they?ll be back in production very soon," Texas Governor Rick Perry said on Sunday during an interview with CNN television.

U.S. crude oil futures traded more than a dollar lower early on Sunday to $63.10 in a special electronic trading session on the New York Mercantile Exchange, as fears eased of Rita?s impact.

Rita is the second storm to strike at the heart of the U.S. energy industry since late August. Katrina?s impact launched record energy prices and the release of emergency petroleum from members of the International Energy Agency.

The Paris-based IEA said Sunday it could release more emergency reserves if needed.

Leading U.S. refiner Valero Energy Corp. said on Saturday said it could take two weeks to a month to restart its 250,000 barrel per day Port Arthur, Texas, refinery -- the worst assessment yet of the 15 refineries shut ahead of Hurricane Rita?s arrival.

Many of the other Gulf Coast refineries appeared to have survived relatively unscathed with some back in start-up mode. Still others said it was too early to comment.

Offshore, oil platforms in the Gulf of Mexico also appeared to be "in relatively good shape," Governor Perry told CNN.

An initial overflight of Rita?s track over the Gulf of Mexico revealed two oil drilling platforms with visible damage, the U.S. Coast Guard U.S. Coast Guard said.

That would add to severe damage found at Shell Oil?s Mars producing platform caused by Hurricane Katrina.

"An aerial assessment of Hurricane Rita?s track line was flown in the Continental Shelf region of the Gulf of Mexico. The survey showed two damaged drilling platforms, but no visible sheens," the Coast guard said in a release late Saturday.

The Coast Guard said it was planning other flights to assess damage offshore. Offshore producing companies said it was too early to give initial assessments of their facilities.

Several major U.S. pipelines carrying crude oil, natural gas and refined products were shut or disrupted due to the effects of Rita -- most of them because the products they normally carry are in short supply.

Among them were the massive Colonial Pipeline to the Northeast, the key Sabine natural gas line and Capline?s crude pipeline to the Midwest, according to the Association of Oil Pipe Lines.

Sabine Pipeline LLC said on Sunday it was not immediately able to confirm reports that its natural gas pipeline linking the Henry Hub supply point had ruptured in the wake of Hurricane Rita. Henry Hub is the supply point for NYMEX natural gas futures.

Colonial Pipeline, meanwhile, said it had restarted operations on its huge distillate line from Baton Rouge to Greensboro, North Carolina, and that it is using portable generators to supplement commercial power to help expedite normal operations between Houston and Pasadena,

In addition, rough conditions caused by Rita halted marine operations at the Louisiana Offshore Oil Port, a major conduit for U.S. oil imports.

LOOP said in a news release it would restart marine operations as soon as weather conditions allowed.

Officials at the pipelines and LOOP were not immediately available Saturday for comment.

[clv101]

Powerful hurricanes can occur quite late in the season...

Here's a list of recent cat 4+ persisting into October in the Atlantic basin:
Lili cat 4 09/21 - 10/04 2002
Michelle cat 4 10/29 - 11/06 2001
Keith cat 4 9/28 - 10/06 2000
Lenny cat 4 11/13 - 11/23 1999
Georges cat 4 9/15 - 10/ 1 1998
Mitch cat 5 10/22 - 11/ 9 1998
Opal cat 4 9/27 - 10/ 6 1995

So it's certainly not unheard of to have large storms late in the year however the probability of another storm in the GoM oil patch is extremely low looking back at past data.

There is of course the possibility that the distribution is now different from the historical distribution.

[clv101]

Okay, so here's some data the main stream media aren't reporting:

Code: Select all

Gulf of Mexico (GOM) Shut-in Oil and Gas
Date         Percent of GOM Oil Shut-in Percent of GOM Gas Shut-in
============ ========================== ==========================
August 30    95.20                      87.99
August 31    91.45                      83.46
September 1  90.43                      78.66
September 2  88.53                      72.48
September 3  78.98                      57.80
September 4  No data reported No data reported
September 5  69.57                      54.13
September 6  58.02                      41.06
September 7  57.37                      40.36
September 8  60.12                      40.20
September 9  59.88                      38.29
September 10 59.84                      38.21
September 11 No data reported No data reported
September 12 57.38                      37.84
September 13 56.45                      37.20
September 14 56.25                      35.18
September 15 56.14                      34.11
September 16 56.06                      33.84
September 19 55.84                      33.75
September 20 58.49                      34.82
September 21 73.16                      47.13
September 22 91.93                      65.95
September 23 99.13                      72.04
September 24 100                        74.88
September 25 100                        80.47

Report from DoE
http://www.electricity.doe.gov/document ... 092505.pdf

[grinu]

http://www.bloomberg.com/apps/news?pid= ... c&refer=us
Media update on damage assessment

http://quote.bloomberg.com/apps/news?pi ... news_index

Sept. 26 (Bloomberg) -- Crude oil and gasoline futures rebounded on speculation that refineries near the Texas- Louisiana border may be shut for longer than expected.

Valero Energy Corp., the nation's largest refiner, said its Port Arthur, Texas, plant has ``extensive'' electrical damage and might be closed for two to four weeks. Six others in Port Arthur and Beaumont, Texas, and Lake Charles, Louisiana, may stay shut because of lack of power and damage from winds or flooding. None of the operators said when output would resume.

The seven refineries in the Port Arthur, Beaumont and Lake Charles area have combined processing of 1.77 million barrels a day, or about 10 percent of U.S. capacity.

[RevdTess]

I spent most of today writing reports on expected refinery outages. We're starting to see a few more 'realistic' timescales finding their way into the market consciousness now. It's amazing how the market is almost paralysed in the face of huge product losses, but when a single refinery announces it's going to take just a few days longer to return than expected, the price jumps up. Bizarre. Never overestimate the amount of information even the big physical players have to hand. And being right is irrelevant if someone with big pockets can move the market far enough so that you have to cover your position. What a rollercoaster