Oil companies began early storm preparations on Tuesday as forecasters predicted Hurricane Gustav will enter the United States Gulf of Mexico as a major storm by the weekend.
Royal Dutch Shell, one of the largest oil and gas producers in the region, said it will begin evacuating non-essential personnel from offshore facilities on Wednesday as energy prices jumped on the threat.
Other companies operating in the Gulf, home to about 25% of US oil production and 15% of US natural-gas output, were monitoring the progress of Gustav, which was churning off the coast of Haiti as a category-one hurricane on Tuesday.
Hurricane forecasters were predicting on Tuesday that Gustav would skirt the western coast of Cuba and enter the Gulf of Mexico as a powerful category-three hurricane with winds in excess of 160km/h by Sunday.
”The entire Gulf energy infrastructure is now threatened,” wrote Jim Rouiller of forecaster Planalytics, who noted two major hurricane forecasting models predicted the storm making landfall somewhere between Houston and New Orleans, which is home to nearly half of US oil-refining capacity.
Prices for refined products rose sharply on cash markets. US natural-gas futures jumped more than 5% while oil futures erased early losses of $2,75 a barrel and jumped more than $2 to trade above $117 a barrel.
”There’s the possibility of a category-three to category-five hurricane in the Gulf on Sunday. There’s major change in the track just since yesterday [Monday], and I’m sure there’s going to be more, but that’s what has everyone’s attention right now. If we get a major hurricane in the Gulf, there’s going to be a lot more short-covering,” said Commercial Brokerage Corp’s Ed Kennedy.
Powerful hurricanes Katrina and Rita knocked out one-quarter of US fuel production in 2005, wrecking production platforms and offshore pipelines and battering several major oil refineries, which sent energy prices soaring.
Repairs to damaged facilities took months and helped to spur oil’s rally in 2006. — Reuters