Twin U.S. Gulf Coast storms move energy giants to deep production cuts

Commodities & Futures
© Reuters. Tropical Storm Marco arrives at the coast of Louisiana as Tropical Storm Laura follows © Reuters. Tropical Storm Marco arrives at the coast of Louisiana as Tropical Storm Laura follows

By Erwin Seba

HOUSTON (Reuters) – Energy companies moved to cut production at U.S. Gulf Coast oil refineries on Monday after shutting half the area’s offshore crude oil output as back-to-back storms took aim at the coast.

Tropical Storms Marco and Laura, a rare double-team assault on key U.S. oil regions, threaten to bring days of heavy rains and strong winds this week. Producers have shut more than 1 million barrels per day of Gulf Coast offshore oil production, 9% of the nation’s total output, facing a storm that is forecast to become a damaging Category 2 hurricane.

Motiva Enterprises [MOTIV.UL] on Monday began preparations to idle its large Port Arthur, Texas, crude oil refinery, said people familiar with plant operations. Total SA (PA:) also reduced production at its refinery in the same city, according to people familiar with its operation. Motiva and Total spokespeople did not immediately reply to requests for comment.

Benchmark gasoline prices rose 7% to a six-month high and futures also rose on the production cuts, traders said. Gulf Coast refiners and offshore producers account for 45% of all U.S. oil processing and 17% of oil output.

Vessel traffic was closed at the Ports of New Orleans, Baton Rouge and from the lower Mississippi River to the Gulf of Mexico. Louisiana Offshore Oil Port, the largest Gulf Coast oil-export facility, also halted operations at its marine terminal on Sunday.

Other refiners, including Exxon Mobil (NYSE:), Valero Energy (NYSE:) and Royal Dutch Shell (LON:), are planning to maintain operations at Louisiana plants as the first cyclone arrives on Monday, people familiar with those refineries said. Storm Marco is expected to drop up to 5 inches (12.7 cm) of rain along the Louisiana coast.

Storm Laura is forecast to strike the Texas/Louisiana coast by Thursday as a Category 2 hurricane with 105 mile per hour (169 km/h) winds and heavy rain.

Valero on Monday began a partial shutdown of its Port Arthur plant, the people said, while Exxon’s Beaumont, Texas, plant on Monday was weighing plans for dealing with Storm Laura.

During 2017’s Hurricane Harvey, which occurred three years ago this week, five feet (1.52 meters) of rain fell on east Texas, forcing Motiva to halt its Port Arthur plant operations for nearly two weeks and others to take shorter shut-downs.

The mayor of Port Arthur on Monday said he was monitoring storm forecasts and was considering a mandatory evacuation of residents that would begin on Tuesday at 6 a.m.

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