Hurricane Ida Shuts Down Oil And Gas Production; How Will It Impact Oil Prices?

Hurricane Ida made landfall in Louisiana on Sunday and forced the shutdown of offshore oil platforms as it churned through the Gulf of Mexico over the weekend, pushing up oil prices. But the prices, which had hit more than a three-week high in early Monday trading, pared some of those gains later in the session, lowering worries about rising pump prices. The Gulf supplies nearly a fifth of U.S. oil demand.

Analysts said motorists can expect increased pump prices by the middle of the week, but at least one said it would be "unlikely to lead … to much beyond a nickel or dime.”

U.S. gasoline futures spiked 4% in New York before paring gains Sunday, Bloomberg reported. Last week, U.S. oil gained 10% and Brent crude gained more than 11% as analysts anticipated oil production disruptions as Hurricane Ida loomed. While some analysts are already sure of the disruptions impacting on oil prices, others said price hikes will depend largely on how much damage Ida will inflict on refineries, the Houma Courier reported.

About 91% of oil production and around 85% of natural gas production in the Gulf of Mexico was cut Saturday. The Gulf produces about 15% of overall U.S. oil and about 5% of its natural gas, raising concerns about the impact of halted operations on gas prices. The Gulf Coast also accounts for about half of U.S. refinery capacity.

The Bureau of Safety and Environmental Enforcement said 290 offshore facilities were evacuated by oil and gas companies by midday Saturday as Ida moved toward drilling rigs. Eleven drill vessels had to be moved out of Ida’s potential path over the weekend. Industry experts have warned of gas price increases over the coming days.

President of Houston-based Lipow Oil Associates LLC Andy Lipow said a Category 4 storm like Ida will likely delay the return of operations in affected refineries, especially with severe flooding and power outages. “For a Category 4, you could be looking at four to six weeks or more for downtime for the refineries,” Lipow said, Bloomberg reported. Data compiled by the outlet found that refineries not sustaining damage from storms or hurricanes can restart operations within a week.

Lipow predicted an increase of up to a dime per gallon within the week in mid-Atlantic and southeastern markets.

Head of petroleum analysis for GasBuddy Patrick De Haan projected “a small nationwide gas price hike.” However, he noted that “it’s unlikely to lead … to much beyond a nickel or dime.” He added that much of the impact on price hikes will likely be felt “mid-next week.”

In its latest update, the National Hurricane Center (NHC) said Ida is moving “further inland over southeastern Louisiana.” The agency warned of potential flash flooding, extreme winds and “catastrophic storm surge” across southern Louisiana.

Ida has weakened to a Category 2 storm and as of 9 p.m. ET, it was 30 miles west northwest of New Orleans and 40 miles east southeast of Baton Rouge.