A quarter of U.S. Gulf of Mexico output offline as hurricane advances

HOUSTON (Reuters) - More than a quarter of U.S. offshore Gulf of Mexico oil output was shut and export ports were closed on Tuesday as Hurricane Sally stalled just off the U.S. Gulf Coast, pelting the region with heavy rains.

Hurricane Sally approaches landfall on the U.S. Gulf Coast, September 15, 2020. NOAA/via REUTERS

Sally weakened on Tuesday to a Category One hurricane with sustained winds of 85 miles per hour (140 kph), moving at a snail's pace that threatened "historic" flooding from Mississippi to Florida, the U.S. National Hurricane Center said in a late day update

The storm plowed through prime U.S. offshore production areas and was meandering on a path toward Alabama and the Florida Panhandle, sparing New Orleans and some larger Gulf Coast refineries from its winds and rain.

Royal Dutch Shell shut its Appomattox oil platform about 80 miles off the coast of Louisiana, joining BP, Chevron Corp and Equinor in closing facilities less than one month after Hurricane Laura knocked about 1.5 million barrels per day of oil offline temporarily.

Nearly 500,000 bpd of offshore crude oil production and 28%, or 759 million cubic feet per day (mmcfd), of natural gas output were shut in the U.S. Gulf of Mexico on Tuesday, according to the U.S. Interior Department.

U.S. crude oil futures rose nearly 3% and gasoline futures climbed 2.3% on Tuesday on the hurricane-related oil production and refinery shut-ins despite demand losses from the COVID-19 pandemic.

The nation’s sole offshore terminal, the Louisiana Offshore Oil Port (LOOP), stopped loading tankers on Sunday, while ports from Biloxi, Mississippi, to Pensacola, Florida, were closed. Ports along the Mississippi River began to reopen late Tuesday with restrictions. The closings will cut roughly 307,000 bpd of crude and 411,000 bpd of refined products, according to Kpler data.

As of 10 p.m. CDT (0300 GMT) on Tuesday, Sally was about 65 miles (105 km) south of Mobile, Alabama, and crawling toward the northwest at 2 mph (3 kph). The crawling advance threatened to inundate the region.

Refiners in the region have wound down operations. Phillips 66 shut its Alliance oil refinery, which processes 255,600 bpd at a site along the Mississippi River on the coast of Louisiana.

Shell cut production to minimum rates on Monday at its 227,400-bpd Norco, Louisiana, refinery, but planned to keep a Mobile, Alabama, chemical and refinery plant operating with a skeleton crew.

Murphy Oil Corp said it was beginning to restore production at its eastern-most Gulf of Mexico oil platforms, and oil-giant Equinor said it expected to return workers to its Titan platform on Thursday.

Reporting by Erwin Seba, Gary McWilliams in Houston and Devika Krishna Kumar in New York; Editing by Marguerita Choy, Jason Neely and Tom Brown