Sam Fletcher
Senior Writer
HOUSTON, July 6 -- Energy prices continued to climb July 5 as Tropical Storm Cindy threatened the Louisiana coast and Tropical Storm Dennis moved into the Caribbean.
It marked the earliest date in recorded tropical storm history that four named storms—Arlene, Bret, Cindy, and Dennis—have formed in the Atlantic basin, said officials of the National Hurricane Center. That apparently confirms earlier predictions that the hurricane season this year might be unusually active.
Cindy came ashore east of New Orleans early on July 6 with winds topping 70 mph. Later in the day, the storm's remnants were reported moving across Alabama.
However, Cindy forced the closure July 5 of the Louisiana Offshore Oil Port, the biggest US oil import terminal. The US Minerals Management Service reported 85 offshore platforms and 11 drilling rigs in the Gulf of Mexico were evacuated ahead of the storm, which triggered the shut-in of 190,506 b/d of oil and 753.08 MMcfd of natural gas production.
The storm caused scattered power outages in Louisiana. As a result, Motiva Enterprises LLC, a 50-50 joint venture of Shell Oil Co. and Saudi Arabia's state oil company Saudi Aramco, had to shut down units July 5 at its 226,500 b/d refinery at Norco, La.
Valero Energy Corp. said July 6 that power failures "resulted in our crude rates being reduced by 25,000 b/d and our FCC unit rates being reduced by 30,000 b/d" at its 190,000 b/d St. Charles refinery. The company also reduced crude rates by 15,000 b/d at its 78,000 b/d Krotz Springs refinery "as a result of reduced crude pipeline rates and tropical storm-related ship delays."
However, analysts at Enerfax Daily said, "Tropical Storm Dennis holds the potential for a far more severe disruption [of oil and gas operations in the Gulf of Mexico] by next week."
That storm strengthened as it pushed across the Caribbean toward Jamaica and Cuba and was expected to pass the hurricane threshold of 74 mph by the evening of July 6. Forecasters said the storm likely would increase its intensity— possibly reaching Category 3 status, near 115 mph—as it crosses the Gulf of Mexico late this week. They said Dennis could make landfall July 18 anywhere from New Orleans to Tampa, Fla.
"A landfall in the central or western Gulf of Mexico could potentially be even more damaging to energy infrastructure than Hurricane Ivan last year," said Enerfax Daily analysts. That hurricane, which went ashore near the Louisiana-Mississippi border in mid-September 2004, destroyed seven platforms in shallow water and damaged 102 pipelines, the MMS reported (OGJ, June 13, 2005, p. 40). The agency said 24 platforms also were damaged.
As of mid-February, MMS estimated Hurricane Ivan had caused operators to shut in a cumulative 43.8 million bbl of oil and 172 bcf of gas, the most in the gulf's history.
Energy prices
The August contract for benchmark US light, sweet crudes jumped by 84¢ to $59.59/bbl on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate was up by the same amount, to $59.60/bbl. For the second consecutive day, heating oil for August delivery hit a record high, up by 2.13¢ to $1.73/gal. Gasoline for the same month escalated by 3.33¢ to $1.68/gal on NYMEX. The August natural gas contract shot up by 30.4¢ to $7.48/MMbtu.
In London, the August contract for North Sea Brent crude increased by 35¢ to $58.29/bbl on the International Petroleum Exchange.
The average price of the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 48¢ to $53.90/bbl on July 5.
Contact Sam Fletcher at [email protected]