Shine Trader Live reports:
Hurricane Ida shut down oil platforms in the Gulf of Mexico, wreaking havoc on the U.S. energy industry. In addition to losing shale oil to Russia, U.S. shale oil is also losing foreign customers.
Oil buyers in Asia are now turning to Russia and the Middle East to buy alternative crude, causing the price of related oil products in the United States to plunge, foreign media reported.
On Thursday, US heavy oil such as Mars and Poseidon, which are drilled off the Coast of Louisiana, fell by more than $1 a barrel against New York crude futures. That was in sharp contrast to the rally of previous days, suggesting that the devastating storm has had little impact on international clients. Buyers in China, South Korea and other countries that are big consumers in Asia are looking for sour crude from the Middle East to replace U.S. crude, leading to lower DEMAND for U.S. crude. Saudi Arabia has also slashed the price of oil shipped to Asia.
The price of US crude oil fell on this double factor.
More than a week after Hurricane IDA hit, more than 1 million barrels a day of oil production remain offline in the Gulf of Mexico. U.S. domestic crude production fell 1.5 million barrels a day in the week ended September 3, the biggest weekly decline on record, according to the latest EIA data. Meanwhile, Kpler analyst Emmanuel Belostrino said:
“Chinese demand for SOUR US crude, such as Mars, has fallen sharply this year as US crude prices are higher than other grades, so the outage may not hurt Chinese refiners.”
Royal Dutch Shell has decided to declare force majeure on a number of its supply contracts as it evaluates the damage caused by Hurricane IDA in the Gulf of Mexico. The move also prompted buyers to turn to other markets.
Shell’s offshore outage has left “Chinese majors scrambling to find alternative sources as many Mars crude contracts scheduled for September and October shipments have been cancelled, with purchases of between 10 million and 12 million barrels,” Yuntao Liu, an analyst at Energy Aspects in London, said in a report.
In addition, with the approval of The State Council, the National Food and Strategic Reserves Administration of China for the first time organized the release of national crude oil reserves by rotation in stages and in batches. This investment is mainly aimed at domestic refining and chemical integration enterprises to relieve the pressure of rising raw material prices of production-oriented enterprises. Giovanni Staunovo, commodities analyst at UBS, said:
“Additional supplies from reserves in large consuming countries reduce the need to import more oil in the short term and also weigh on prices.”