Zenith Energy, the listed international oil and gas production company focused on pursuing African development opportunities, has announced the commencement of workover activities in well Robbana-1 (ROB-1) in the Robbana concession, onshore Tunisia

Abu Dhabi National Energy Company PJSC (TAQA), one of the largest listed integrated utility companies in the region, has initiated a strategic review of its oil and gas operations 

A slow, gradual recovery for global land rig demand is expected following the COVID-19 induced downturn in 2020, according to an analysis from Westwood Global Energy Group, the specialist energy market research and consultancy firm

Rystad Energy’s initial assessment of Hurricane Ida’s impact on US oil production and refinery capacity estimates a peak daily supply curtailment of 1.8 million barrels per day (bpd) in the Gulf of Mexico, nearly 2 million bpd of US Gulf Coast refining capacity is estimated to be currently offline

Based on reported power outages and the closure of refineries in preparation for the storm, nearly 2 million bpd of US Gulf Coast refining capacity is estimated to be currently offline.

As was the case with major hurricane and storm events during the 2016-2020 period, Rystab Energy estimate the cumulative production outage impact to be equivalent to 5.5 days of maximum capacity, assuming rapid reactivation to start as soon as 31 August and 1 September.

This will result in an impact of approximately 215,000 bpd and 127,000 bpd on monthly averages for August and September, respectively. However, a certain downside supply risk is present, relating both to additional weather disruptions as Rystab Energy remain in the middle of hurricane season and to delayed reactivation of some facilities.

Based on reported power outages and the closure of refineries in preparation for the storm, nearly two million bpd of US Gulf Coast refining capacity is currently offline due to Hurricane Ida. As Ida has been downgraded from Category 4 to Category 1 and is moving northeast, Rystab Energy expect the worst impact to have passed and estimate that refineries will remain offline for between seven and 14 days maximum, depending on the extent of damage due to flooding.

“We see a risk that the loss of US refinery demand will be greater and more prolonged than the loss of crude supply, which, depending on the extent of refinery shut-ins and power outages, could further weaken the flat price, the structure for WTI and potentially WTI-Brent further for both September and possibly October 2021,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Impact on products demand

When it comes to road transport, Louisiana is among the states in PADD 3 that are the most affected by the hurricane. The traffic index on 28 August saw a short spike up to 40% above the equivalent day in 2019, as many residents drove out of state to flee the hurricane. 

While international travel remains weak and is hampering a return to pre-Covid levels, domestic travel is the main contributor to flight activity in the US. However, the anticipation of the landfall of Ida prompted people in Louisiana to flee their homes, spurring an increase in flight activity

As the damage assessments unfold, the estimates will be updated in the coming days. The nature of Hurricane Ida and the extent of power outages and flooding requires particular attention, especially with respect to the duration of refinery outages. Barring any immediate new storms, offshore crude production should be able to bounce back relatively quickly, leading to an overall net negative effect on crude and conversely a bullish effect on road fuels such as gasoline.