Oil prices pared early gains on Monday, off more than three-week highs reached earlier in the session as a powerful hurricane ploughing through the Gulf of Mexico forced shutdowns and evacuations of hundreds of offshore crude platforms.
U.S. gasoline prices rose more than 3% as power outages added to refinery closures on the Gulf coast.
U.S. oil turned negative and was down by 6 cents at $68.68 a barrel, having jumped a little over 10% last week.
The benchmarks hit highs not seen since early August, $73.69 and $69.64, respectively, earlier in the session, as Ida slammed into the coast near Port Fourchon, Louisiana, a hub of the Gulf’s offshore energy industry.
“It’s still early days to know the full impact of Hurricane Ida. Oil products, like gasoline and diesel, are likely to see prices rise more acutely from refinery outages, especially if there are difficulties in bringing refineries and pipelines back online,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia.
Colonial Pipeline Co, the operator of the largest petroleum products pipeline in the United States, said it would temporarily halt fuel deliveries from Houston to Greensboro, North Carolina, due to Ida.
On the production side, energy companies had halted more than 95% of crude output, or 1.74 million BPD’s worth, in the U.S. Gulf of Mexico by Sunday, according to the Bureau of Safety and Environmental Enforcement, as Ida headed toward drilling rigs and other infrastructure. The Gulf supplies about 17% of the nation’s oil.
The offshore regulator said that oil and gas companies evacuated around 300 offshore facilities and moved more than 10 drill vessels out of harm’s way.
Louisiana Offshore Oil Port (LOOP), the biggest privately-owned crude terminal in the United States, halted deliveries before the hurricane.
LOOP is the only U.S. terminal able to unload supertankers, handling about 10% to 15% of U.S. domestic oil, 10% to 15% of its oil imports, and is connected to about half of the U.S. refining capacity, the Port Fourchon website says.
Ida smashed into the coast near Port Fourchon at 1655 GMT on Sunday as an extremely dangerous Category 4 hurricane, the National Hurricane Center said, before starting to weaken.
Those who either could not or would not evacuate will have to brace for the toughest test yet of the billions of dollars spent on levee upgrades around nearby New Orleans following Hurricane Katrina more than a decade ago.