Oil prices surged nearly three percent on Wednesday afternoon due to concerns over potential supply disruptions caused by Hurricane Francine. The storm is making its way through the Gulf of Mexico, leading major operators to shut down production and evacuate personnel.
This price increase occurred despite a report from the Energy Information Administration (EIA) earlier in the day, which showed a rise in U.S. oil stockpiles. Initially, the report pushed oil prices lower, but the storm’s impact quickly took center stage.
The hurricane’s potential to cause extended production outages comes at a time when Libyan oil output is already down due to a conflict between rival governments.
As of 2:15 p.m. ET on Wednesday, Brent crude was up 2.41%, trading at $70.86 per barrel. West Texas Intermediate (WTI), the U.S. benchmark, saw a 2.60% increase, reaching $67.46 per barrel.
Meteorologists anticipate that Tropical Storm Francine will strengthen into a hurricane later today as it moves northeast toward the Gulf Coast. The storm poses a significant threat to offshore oil and gas platforms as well as inland refineries.
Current weather models predict that Francine could become a Category 2 hurricane by tomorrow afternoon or evening and make landfall on the Louisiana coast.
On Monday, Chevron, Exxon Mobil, and Shell announced the evacuation of workers from offshore rigs in the storm’s path and the suspension of drilling activities. According to a Reuters report on Tuesday, Exxon plans to reduce production at its 522,500-barrel-per-day facility to just 20% of capacity ahead of the hurricane’s arrival.
The U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported at 2:11 p.m. that 46% of the Gulf of Mexico’s 371 manned platforms have been evacuated. Additionally, 60% of personnel have been removed from five rigs operating in the Gulf, and four other rigs have been moved as a precaution.
Currently, nearly 40% of Gulf of Mexico oil production has been shut down, and almost 50% of natural gas production has been halted.