Benchmark oil prices reached their highest level in five months on Wednesday as hundreds of US offshore oil facilities were closed in preparation for the arrival of Hurricane Laura.
310 facilities in the Gulf of Mexico were evacuated, effectively halting 84% of oil production in the Gulf – equivalent to a loss of 1.56 million barrels per day – and at least a third of synthetic rubber capacity in the US. The scale of the shutdown is comparable to the 90% production outage caused by Hurricane Katrina in 2005.
The news pushed oil futures contracts to their highest prices since early March, before the US and other nations first implemented lockdown measures in response to the COVID-19 pandemic.
Brent crude rose 0.4% to $46.05 per barrel in early Wednesday trading, and West Texas Intermediate rose 0.2% to $43.43 per barrel.
According to Reuters, AxiCorp’s chief global markets strategist Stephen Innes commented: “Markets are currently pricing in a possible near-term catastrophic gasoline shortage.”
Hurricane Laura is expected to make landfall on Thursday near the Texas-Louisiana border, where many petrochemical plants and refineries are situated. The National Hurricane Centre predicts that it will be a major hurricane with wind speeds of at least 111 miles per hour by time of landfall.