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Special Report Hurricane Katrina's Impact on U.S. Energy           


Hurricane Katrina's Impact on the U.S. Oil and Natural Gas Markets


As of Tuesday, August 30, 3:00 pm --SEE MOST RECENT--

According to the Minerals Management Service (MMS), as of 11:30 Central Time August 30, Gulf of Mexico oil production was reduced by over 1.4 million barrels per day as a result of Hurricane Katrina, equivalent to about 95 percent of daily Gulf of Mexico oil production. The MMS also reported that 8.8 billion cubic feet per day of natural gas production was shut in, equivalent to 88 percent of daily Gulf of Mexico natural gas production.

The Louisiana Offshore Oil Port (LOOP), which stopped all operations as of Sunday, August 28, in order to give employees time to evacuate, appears to have suffered "no apparent catastrophic damage" according to a port official, based on an initial damage assessment. The biggest hurdle the LOOP facility has in restarting operations is in restoring electrical power. Typically, about 1 million barrels per day goes through the LOOP.

As of the close of trading on Tuesday, the WTI futures price gained $2.61 per barrel from yesterday, settling at $69.81, an all-time high for the near-month closing price (unadjusted for inflation). The gasoline near-month futures price gained 41.4 cents per gallon from yesterday, settling at 247.5 cents per gallon, an all-time high for the near-month closing price (unadjusted for inflation). The heating oil near-month futures price gained 16.7 cents per gallon from yesterday, settling at 207.6 cents per gallon, another all-time high for the near-month closing price (unadjusted for inflation).

Oil prices increased dramatically today as the market sensed that it could be several days or longer before petroleum infrastructure in the Gulf Coast area returns to more normal levels. With electrical power down in many parts of the area, even if refineries, pipeline, platforms, and import terminals are not severely damaged, they will be unable to re-open without electricity. Concerns remain as to how long it will take petroleum infrastructure to return to normal operations given the damage to the area's electrical power and distribution system.

As of August 19 (the most recent data available), U.S. commercial crude oil inventories were well above the average range for this time of year. However, gasoline inventories were at the lower end of the average range, and with demand growing at a 1.6 percent rate over the most recent 4-week period, they are very low in terms of the amount of days gasoline inventories would supply. Distillate inventories remain above the average range for this time of year. Inventory data as of August 26 will be available at 10:30 am ET on Wednesday, August 31.

The natural gas futures price for October delivery was up $0.52, to reach $11.66 per million Btu (MMBtu) as of the close of trading on Tuesday, August 30, an all-time high for the near-month closing price (unadjusted for inflation). In trading on the Intercontinental Exchange, the Henry Hub spot price was $12.36 per MMBtu in today's trading, up $2.51 from last Friday's price. (Owing to the hurricane, trading was suspended at the Henry Hub yesterday.) At market locations across the Gulf region, price increases averaged $0.97 per MMBtu with a range up to $2.73 per MMBtu. The overall average increase was $0.61 per MMBtu.

Flows through the Henry Hub were zero during the period from 6 p.m. (Eastern Time) on Sunday until 12:30 p.m. on Monday. While volumes received for Tuesday, August 30, are 4 percent below those of the previous Tuesday (perhaps owing to a drop in receipts from the offshore), shipments from the Hub are 33 percent higher. Preliminary assessment of the Henry Hub operations indicates that the Hub avoided significant damage from Hurricane Katrina.

Hurricane Katrina apparently has had little impact on receipts of liquefied natural gas (LNG) shipments at the LNG terminal at Lake Charles, Louisiana. Trunkline LNG, operator of the facility, had shut down operations until at least September 1 for unscheduled maintenance to accommodate expansion tie-ins. BG, which controls full capacity at Lake Charles, appears to have re-directed at least one cargo to the El Paso-operated Elba Island terminal in Georgia.

As far as the impacts of Hurricane Katrina on the projections for the upcoming Short-Term Energy Outlook, it is still too early to say since, the length of the disruption, size and composition (i.e. types of crude oil and specific refinery outages) will make a large difference. Near-term price movements may or may not translate into significant projection differences over the upcoming winter.

 


                                                map courtesy of iMapData Inc.

Gulf of Mexico Oil & Natural Gas Facts
Energy Information Administration
Data as of June 2005 unless otherwise noted.

Gulf of Mexico
Total U.S.
% from
Gulf of Mexico
Oil (million barrels per day)
  Federal Offshore Crude Oil Production (4/05)
1.562
5.488
28.5%
  Total Gulf Coast Region Refinery Capacity (as of 1/1/05) 
8.068
17.006
47.4%
  Total Gulf Coast Region Crude Oil Imports
6.490
10.753
60.4%
    - of which into ports in LA, MS and AL
2.524
10.753
23.5%
    - of which into LOOP
0.906
10.753
8.5%
Natural Gas (billion cubic feet per day)
  Federal Offshore Marketed Production (3/05)
10.4
54.1
19.2%

News & Recent Reports

DOE Office of Electricity Delivery & Energy Reliability hurricane situation reports
Department of Interior Minerals Management Service
Coast Guard Hurricane Katrina Incident Management Site
DOE Secretary Bodman's statement on Hurricane Katrina



References
Lousiana Oil Profile
Lousiana Natural Gas Summary
Mississippi Oil Profile
Mississippi Natural Gas Summary
Alabama Oil Profile
Alabama Natural Gas Summary


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August 29, 2005