How Hurricane Ian approaching US could impact oil prices

Hurricane Ian is not expected to pose a major threat to the national oil and gasoline supply, even if the Category Three storm derails some oil production in the Gulf of Mexico.

Oil prices rose 2.4% on Tuesday morning, although they remain near eight-month lows and fell sharply last week.

Hurricane Ian is approaching western and central Florida with strong winds of 200 km/h.

While there may be localized supply issues in Florida caused by the storm, Hurricane Ian does not appear to be a major risk to the national oil and gasoline supply largely because Florida is not a major producer or refiner.

Importantly, the Gulf Coast refinery and producer hub is not in the storm’s path as currently predicted.

“This will not be a significant event for the global oil market,” said Michael Tran, commodity strategist and digital intelligence at RBC Capital Markets.

However, forecasters say Hurricane Ian’s path remains uncertain and a move west would change things, putting aside additional oil production in the Gulf of Mexico and the country’s vital refinery hub in Louisiana and Texas.

“The biggest risk would be if the path changed and turned west,” said Bob McNally, president of consultancy Rapidan Energy Group.

“So far, I don’t see much of an impact.”

BP and Chevron announced Monday the evacuation of personnel from offshore oil and natural gas fields in the Gulf of Mexico because of Hurricane Ian.

These evacuations derailed about 485,000 barrels a day of oil production, representing 27% of Gulf of Mexico oil production, according to veteran oil analyst Andy Lipow.

To put this into context, this equates to less than 5% of total daily US oil production.

Lipow said there could be delays in the delivery of gasoline, jet fuel and diesel to the Florida market due to Hurricane Ian, especially if the refined products terminals in Tampa are damaged by high winds and flooding. Severe flooding could take these terminals offline for weeks, Lipow said.

Analysts said Tuesday’s jump in oil prices could partly be a response to these Gulf of Mexico rig shutdowns.

But it also comes after a series of sharp losses and as the stock market recovers from the recent sell-off.

In addition, markets are wary of speculation that OPEC and its allies may announce plans next week to cut output. Another factor: the US dollar is losing ground and this tends to boost dollar-priced commodities such as oil.

Gasoline prices have risen in recent days, although this trend began before Hurricane Ian formed.

The national average for regular gasoline is now $3.75 a gallon, up from a recent low of $3.67, according to the American Automobile Association (AAA).

“National retail gas prices are rising, but not because of the hurricane,” Lipow wrote in an email.