Gulf Coast Oil Hoped To Reach Pre-Isaac Highs

The Oil Price Information Service (OPIS) reports that Gulf Coast distillate prices in the U.S. Gulf Coast region are up a penny-and-a-half this morning, but not back to pre-Isaac highs.

However, October heating oil futures continue to build on post-Isaac strength, OPIS reported.

Ultra-low-sulfur diesel has seen some activity early, with market sources confirming trades up 9.75 cents.

This morning’s moves has ULSD up 15 points, helping to push cash prices up 1.50-2cents to $3.2425 a gallon and higher.

Values have shown a strong recovery since faltering after Monday’s pre-Isaac rally, with current prices already cresting the highs of early this week. If such strength in October futures and cash markets is able to continue, prices seem poised to crack the $3.25-a-gallon barrier, a threshold reached the first week of April.

Although early trading has not been completely dead, it is possible that distillate activity in the U.S. Gulf Coast may be subdued through the afternoon. None of the material in the distillates arena reaches scheduling deadlines until next week and the upcoming holiday weekend may ultimately slow activity.

Trade started slow but differential levels softened notably from where things had run up before the Labor Day weekend.

The market is back into a normalizing mode after this past week’s wild gyrations. Look for prices to soften further into September if the region stays hurricane-free, stated OPIS.

Meanwhile, The Associated Press reported that no major damage to oil platforms or refineries have been reported, and no further storm-related spikes in energy prices are expected.

The Bureau of Safety and Environmental Enforcement said Monday that 800,000 barrels per day of oil production remained offline, 58 percent of Gulf of Mexico production. About 100,000 barrels per day of production was restored between Sunday and Monday.

At the height of the storm 1.3 million barrels per day of oil production was suspended. The U.S. consumes an average of 19 million barrels of petroleum every day.

Companies have been quickly returning workers to platforms. About 12 percent of the region’s platforms were still without staff. Nearly all of the Gulf’s offshore platforms and rigs were evacuated last week.

Nine refineries in the path of Isaac are restarting or operating at reduced rates, according to the Energy Department. One refinery has returned to full operation and one, the Belle Chasse, La., refinery operated by Phillips 66, is still shut down because it is still without power.

The company said Sunday most of the floodwater had been cleared from the refinery and most refinery personnel had returned to work to prepare the plant for re-start when power was restored. On Monday, the company said there was no update to the refinery’s status.

The national average price of gasoline rose 11 cents last week as Isaac threatened the Gulf Coast and then swept ashore with high winds and flooding rains. But by Friday the price had leveled off to just under $3.83 per gallon. Monday, the average price declined — barely — by 0.2 cents, to $3.827 per gallon, according to the Oil Price Information Service, AAA and Wright Express.

That’s the highest ever price for gasoline for Labor Day, though it is 11 cents below this year’s high of $3.94 per gallon, set April 6.

Analysts say that gasoline prices should drift lower in the coming weeks as Gulf coast refineries ramp back up, the summer driving season ends and refiners switch to cheaper winter blends of gasoline.

Refineries in the path of the storm shut down or began operating at lower rates to protect their operations, depriving the market of millions of gallons of gasoline and sending prices higher. Refiners consume enormous amounts of electricity and they generate steam to cook crude oil into gasoline, diesel and jet fuel. If the process is interrupted suddenly by a loss in power or steam, fluids can get trapped in equipment and re-starting the refinery can take many weeks. Instead, operators often choose to slow or shut refineries before a storm hits so they can restart as soon as power is restored.

Onshore pipelines, ports and terminals have re-opened, though some are still operating with restrictions, the Energy Department said. Some sections of Shell’s offshore pipeline network have restarted, and others are expected to restart in the next few days, according to AP.

Several natural gas pipelines remain shut, along with natural gas processing plants that depend on gas from the pipelines. The Energy Department reported that most operators anticipate gas flows resuming over the next few days.

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