(Adds NHC update, fuel pipeline operating normally)
By Erwin Seba
HOUSTON, Sept 16 (Reuters) - More than a fourth of U.S. Gulf
of Mexico offshore oil and gas production remains shut by
Hurricane Sally, which moved inland early Wednesday, dumping
heavy rains and cutting fuel demand in the U.S. Southeast.
The storm made landfall near Gulf Shores, Alabama, as a
powerful Category 2 hurricane. Oil prices rose early on
Wednesday, in part on the expectation of a temporary drop in
U.S. production.
Nearly 500,000 barrels per day (bpd) of offshore crude oil
production and 759 million cubic feet per day (mmcfd) of natural
gas output were shut in the U.S. Gulf of Mexico, according to
the U.S. Interior Department. That is roughly a third of the
shut-ins caused by Hurricane Laura, which landed further west in
August.
Oil and chemical ports along the Mississippi River were
moving to reopen with restrictions, and oil and gas producers
were preparing to return workers to offshore platforms.
The hurricane was between Gulf Shores and Pensacola, heading
northeast at 4 miles (7 km) per hour with sustained winds of 85
mph (140 kph), the National Hurricane Center said at 9 a.m. CDT
(1400 GMT).
The NHC canceled storm surge warnings for the Louisiana
coastline, signaling the removal of a threat to oil refineries
in that state. Phillips 66's 255,600-bpd Alliance,
Louisiana, refinery remains shut and Royal Dutch Shell
cut production to minimum at its 227,400-bpd Norco, Louisiana,
refinery.
There was 1.1 million bpd of U.S. Gulf Coast refining
capacity offline on Tuesday, according to the U.S. Energy
Department, including two plants under repair since Laura and
another halted by weak demand due to the COVID-19 pandemic.
OIL PRICES RISE
Crude oil futures rose more than 2% on
Wednesday, paring gains after a drop in U.S. crude stockpiles.
. Gasoline futures also climbed nearly 2% despite
a larger-than-expected draw in inventories.
"Even if the weather keeps production shut for a couple of
days, the sheer volume of its size is enough for the market to
breathe a bit," said Rystad Energy senior oil markets analyst
Paola Rodriguez-Masiu in a comment.
The Colonial Pipeline, which brings fuel from refineries to
the U.S. East Coast, was operating normally, its operator said.
The NHC warned Sally could bring "catastrophic and
life-threatening" flooding along portions of the Gulf Coast with
10 to 20 inches (25-50 cm) of rain expected and up to 30 inches
in some spots.
(Reporting by Erwin Seba in Houston and Stephanie Kelly in New
York; editing by Jonathan Oatis and Marguerita Choy)
