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UPDATE 3-Hurricane's heavy rains to dampen fuel demand, offshore sites closed

Wed, 16th Sep 2020 14:01

(Adds graphic, updates oil prices)

By Erwin Seba

HOUSTON, Sept 16 (Reuters) - More than a fourth of U.S. Gulf
of Mexico offshore oil and gas production remains shut because
of Hurricane Sally, which is creeping inland along the
Alabama-Florida border, causing life-threatening flooding and
cutting fuel demand in the U.S. Southeast.

The storm made landfall near Gulf Shores, Alabama, as a
Category 2 hurricane on Wednesday morning. Oil prices rose early
Wednesday, attributed in part to 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 some offshore operators
were preparing to return workers to offshore platforms on
Thursday.

The hurricane was between Gulf Shores and Pensacola, heading
northeast at 3 miles per hour (5 km per hour), with sustained
winds of 100 mph (160 kph), the National Hurricane Center said
in an update at 7 a.m. CDT (1200 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.

OIL PRICES RISE

Crude oil futures rose more than 3% on
Wednesday, extending the previous session's gains caused by the
shut-ins and an industry report forecasting a drop in U.S. crude
stockpiles.

"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 NHC earlier warned Sally could drop 10 to 20 inches
(25-50 cm) of rain and up to 30 inches in some spots. It warned
of "catastrophic and life-threatening" flooding along portions
of the northern Gulf Coast.

(Reporting by Erwin Seba in Houston and Stephanie Kelly in New
York; editing by Jonathan Oatis and Marguerita Choy)

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