Oil held near a five-month high as Hurricane Laura bore down on key refining facilities on the U.S. Gulf Coast, with forecasts saying it will strengthen rapidly into a “potentially catastrophic” Category 4 storm.
Futures in New York were steady after jumping 1.7% on Tuesday. The storm is expected to make landfall late Wednesday or early Thursday along the Texas-Louisiana coast, according to the National Hurricane Center. More than 84% of oil output in the Gulf of Mexico has now shut, while almost 3 million barrels a day of refining capacity has been closed.
Prices also got a boost after the American Petroleum Institute reported U.S. oil inventories fell by 4.52 million barrels last week and gasoline stockpiles shrunk by 6.39 million barrels, according to people familiar with the data. That would be the fifth straight weekly decline in crude supplies if the industry estimates are confirmed by official data due Wednesday.
Laura has the potential to take some big refineries offline and disrupt global energy flows. On its current track, the storm could lead to around 10% to 12% of U.S. refining capacity being shut for more than six months, according to a disaster modeler with Enki Research. Tanker rates to ship gasoline from Europe to the U.S. are already surging even before Laura makes landfall.
“Oil traders will be pre-occupied with the developments of the hurricane today,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “The most dangerous hurricane of the past 15 years is approaching the major U.S. oil producing and refining center.”
The hurricane will likely only have a short-term impact on global prices, however, with this year’s lackluster summer driving season nearing an end and a pickup in consumption remaining uncertain due to the pandemic. Gasoline demand in key consuming nations appears stuck at about 10% to 15% below year-earlier levels, while jet fuel usage is much further behind.