(Bloomberg) -- Oil and chemical facilities located along the Texas and Louisiana coasts are racing to shutter plants as Hurricane Laura settles on a course to rip through the nation’s energy corridor this week.
Some of the largest U.S. refineries are shutting in advance of Laura, affecting nearly 3 million barrels a day of capacity along the U.S. Gulf Coast, according to a Bloomberg calculation. That’s about one third of the Gulf Coast refining capacity, according to figures from Lipow Oil Associates. More than 84% of oil production and nearly 61% of natural gas production has been taken offline, according to the Bureau of Safety and Environmental Enforcement.
READ: Storm Laura Set to Slam U.S. Energy Coast as a Major Hurricane
Gasoline prices surged on the disruptions and concern that Laura could approach a level of destruction not seen since Hurricane Harvey in 2017. Gasoline futures jumped for a second day in a row, rallying by as much as 5.3% after notching the biggest one-day climb since May on Monday. Prices were also trading at the highest since before the Covid-19 pandemic sent demand spiraling in early March.
“From a refining standpoint, it’s not as bad as what happened during Harvey,” said Andy Lipow, president at consultancy Lipow Oil Associates, though that could change depending on the strength of the storm. However, this time any supply disruptions would be occurring in a vastly different market because of the pandemic. “Refiners are operating at about 80% utilization,” he said. “That means refiners who aren’t impacted by the storm can pick up” any slack in supply. He added that gasoline inventories are also slightly higher versus a year ago, with diesel stocks much higher.
Motiva Enterprises LLC, which operates the largest refinery in the U.S., is shutting both its 607,000 barrel-a-day oil refinery and chemical plant in Port Arthur, Texas, according to people familiar with the matter and a regulatory filing. A Motiva official could not be reached for comment. Valero Energy Corp (NYSE:VLO). is also shutting its 335,000 barrel-a-day Port Arthur facility. Total SE said it was starting an orderly shutdown of its 225,500 barrel-a-day refinery there.
The city of Port Arthur and Jefferson County have issued a mandatory evacuation for some residents, government officials urged some residents of Houston’s eastern suburbs to leave their homes.
Meanwhile, Exxon Mobil Corp (NYSE:XOM). has started shutting down both its 560,500 barrel-a-day Baytown refinery and 369,000 barrel-a-day Beaumont refinery. Phillips 66 (NYSE:PSX) is shutting its 260,000 barrel-a-day Lake Charles refinery. Delek US Holdings’ 80,000 barrel-a-day Krotz Springs refinery had been shut due to a boiler issue and would remain down because of the hurricane, according to a person familiar. Citgo Petroleum Corp is also shutting its 418,000 barrel-a-day Lake Charles refinery, according to sources.
Calcasieu Refining Co’s 135,500 barrel-a-day refinery in Lake Charles is also shut, though it happened earlier this month due to low demand.
If past weather events are any indication, says Robert Yawger, director of energy futures at Mizuho Securities USA LLC, offshore platforms will be the first to resume production after the storm passes. Refineries, which require more people to operate than a platform, will depend on how quickly everyone can get back to work.
(Updates figures in deckhead 1 and paragraph 2, updates offshore outage in paragraph 2)
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