St. Bernard Parish Sheriff’s Office inmate workers move free sandbags for residents in Chalmette, La., Thursday, July 11, 2019. The Mississippi Emergency Management Agency is telling people in the southern part of the state to be prepared for heavy rain from Tropical Storm Barry as it pushes northward through the Gulf of Mexico.
Matthew Hinton | AP
The U.S. Coast Guard expects to close the Port of New Orleans and lower Mississippi River by midday New Orleans time Friday, officially stopping all commercial shipping ahead of the arrival of Tropical Storm Barry.
A Coast Guard spokeswoman said shipping activity has already been curtailed, ahead of the announcement, which should be made before 12 p.m. CDT.
“The port’s not closed from the Coast Guard standpoint, but people have gotten to the point where they know it will close,” said Lt. Rachel Ault. “For the most part there’s really no movement.”
Barry’s winds have begun buffeting the Louisiana coast, sections of which are under hurricane watch. The National Weather Service is warning of storm surge and heavy rains from the storm, which has the potential to become the first hurricane of the season.
If Barry becomes a hurricane, it mostly likely will be a Category 1 storm, with much less wind damage potential than other storms that have hit the area. Refineries in its path could be vulnerable to storm surge and other flooding, which could keep personnel from reporting to work.
“Most of the refineries are rated for a Cat 3 and have come through Cat 4 and 5 storms pretty well,” said John Kilduff, partner with Again Capital. “I’m more concerned about the flooding of the Mississippi down by its mouth because of all the water that was already coming down. I’m more worried about the shipping interests, and what it would do to both imports and exports and movement of supply.”
The oil industry has already been moving tankers out of the area and shut in more than half the Gulf of Mexico’s oil production. The government estimates that as of Thursday, 53.4% of current production, or 1 million barrels of oil per day, had been curtailed, as the industry evacuated workers in the Gulf. About 45% of all natural gas production had also been shut-in.
The industry is not anticipating longer term disruptions from Tropical Storm Barry, but the amount of flooding that comes with the storm could be the wild card.
Tom Kloza, head of global energy analysis at Oil Price Information Service, said refineries were all running at high summertime rates, and so far the only refinery that had a precautionary shutdown was Phillips 66‘s Alliance refinery.
Kloza said the refineries have extensive plans for storm-related outages, but they do not include them in any preset schedule. They do plan for seasonal maintenance which is done twice a year before and after summer gasoline production. “They don’t plan to go down in the middle of the season,” he said.
“They have product on hand, but they have to take the refinery down very carefully and they have to take it back up very carefully. It might be a week before they’re back to normal,” he said.
Kloza said he is watching for possible announcements from two other refineries in Lake Charles. One is owned by Citgo, the other by Phillips 66.
Paul Sankey of Mizuho notes there are refineries with capacity totaling 1.8 million barrels a day in the potential path.
The storm will impact U.S. imports and exports of fuel and crude, which have grown dramatically in the past year.
“It clogs exports. You have so much ingress and egress in terms of cargos moving in and out of the gulf coast now,” said Kloza.
Like other analysts, Kloza said the storm may not damage much energy infrastructure but it will wreak havoc with the government’s weekly oil market report, watched by the market globally for its supply/demand data. The next report is due Wednesday at 10:30 a.m., and the data could be skewed by the storm. The data could be impacted both by the storm disrupting exports and imports. The industry may also not be as focused on supplying the data in the New Orleans area as it normally would be.
“It really screws up EIA reports next week and perhaps the week after that. We’re going to get some screwed up data. Also, we could get sweet crude go up in price at the Gulf Coast but Cushing doesn’t match it,” he said, suggesting the spot market on the coast could get bid higher than the price of crude at Cushing, the US storage hub.