(Adds prices rise, latest position, closest refinery ran
through storm)
By Erwin Seba and Stephanie Kelly
HOUSTON/NEW YORK, Sept 16 (Reuters) - More than a fourth of
U.S. Gulf of Mexico offshore oil and gas production remained
shut on Wednesday by Hurricane Sally, which moved inland 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 and gasoline prices rose on
Wednesday on a temporary drop in U.S. production and a decline
in oil stocks.
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.
The storm toppled trees, flooded streets and left 500,000
homes and businesses without electricity. The outages could
reduce fuel sales in coming days, said Patrick De Haan, head of
petroleum analysis at GasBuddy.
Oil and chemical ports along the Mississippi River were
moving to reopen with restrictions, and oil and gas producers
were returning workers to offshore platforms in the western and
central Gulf of Mexico.
The hurricane was over the Florida Panhandle and heading
northeast at 5 miles per hour (8 kph) with sustained winds of 75
mph (120 kph), the National Hurricane Center said at noon CDT
(1700 GMT).
Chevron's Pascagoula, Mississippi, refinery, about 50 miles
west of the storm's landfall, ran through the night, a spokesman
said. Phillips 66's 255,600-bpd Alliance, Louisiana,
refinery remained shut and Royal Dutch Shell cut
production to minimum at its 227,400-bpd Norco, Louisiana,
refinery.
There were 1.1 million bpd of U.S. Gulf Coast refining
capacity offline on Wednesday, 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 benchmarks rose about 4%, despite an
unexpected drop in U.S. crude stockpiles and a
larger-than-expected draw in motor fuel inventories. Gasoline
futures also rose 3.6% in midday trading.
"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 had produced "catastrophic and
life-threatening" flooding along portions of the North-Central
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 Marguerita Choy and Steve Orlofsky)
