Texas Oil Industry Braces For Impact As Hurricane Nicholas Makes Landfall

  • Sep 14, 2021
  • Investing

Tropical storm Nicholas, which was upgraded to a Category 1 hurricane yesterday, made landfall in the early hours of Tuesday in the Matagorda Peninsula, threatening dangerous flooding in the U.S. oil heartland just days after another hurricane, Ida, shut down almost all offshore oil production and a lot of Gulf Coast refining capacity.

The progress of the hurricane pushed oil prices to the highest in six weeks on Monday, as more than 40 percent of U.S. offshore oil production, or close to 800,000 bpd, still remains shut down from Ida. The last hurricane at one point shut down as much as 95 percent of production.

“The threat of more disruptions from extreme weather is also a cause of concern for producers and a reason for traders to add price premiums,” Nishant Bhushan, Rystad Energy’s Oil Markets Analyst, told the Houston Chronicle. “Nicholas could impact loadings at the ports and also refineries, and turn last week’s rising number of working rigs around again.”

The National Hurricane Center warned of dangerous floods as Nicholas approaches land. The center reported that various warnings have been issued for several regions along the Texas Gulf Coast, including Sabine Pass—home of the largest LNG export facility in the country.

“On the forecast track, the center of Nicholas is expected to make landfall along the Texas coast in a few hours [on Wednesday], move over extreme southeastern Texas on Tuesday and early Wednesday, and over southwestern Louisiana later on Wednesday.”

The hurricane is currently moving at maximum sustained winds of 74 mph with higher gusts, the NHC also said. These speeds are unlikely to change before Nicholas makes landfall.

Texas Governor Greg Abbott has said states of emergency will be declared for 17 counties and three cities in anticipation of Nicholas’ landfall, which is more likely than not to push oil prices further up.