You Really Got Me - Crude Oil Export Volumes Hold Up Despite a Barrage of Storms

Last week, Hurricane Delta became the latest of a string of hurricanes and tropical storms that have assaulted the Gulf Coast this year and disrupted energy production in the Gulf of Mexico — and energy exports. A number of major storms made direct hits or glancing blows to crude export centers like Corpus Christi, Houston, Beaumont, and Louisiana, forcing marine terminals to either slow down their carrier-loading operations or shut down for a few days at a time. That led to a yo-yoing of weekly export volumes: way down one week, way up the next. Despite the short-term dislocations, however, total export volumes since the hurricane season started on June 1 are actually up slightly from the first five months of 2020, a testament to the resilience not only of the export market but to the marine terminals themselves. Today, we discuss how hurricanes and tropical storms have been affecting export-terminal activity.

There is no denying that 2020 has been a brutal year for U.S. crude oil producers. As we chronicle each week in RBN’s Crude Oil Gusher report, the U.S. was producing about 13 MMb/d during the first three months of this year — all-time-record volumes, and 30% more than the Pre-Shale Revolution peak back in 1970. But, as we know all too well, then came COVID-19, stay-at-home orders, demand destruction, E&P capital-spending cuts, and a production pullback the likes of which the U.S. had never seen. U.S. crude oil production now stands at about 10.5 MMb/d, or 20% below the first-quarter peak — in fact, it has been below 11 MMb/d for all but a few weeks since May, and RBN expects production to remain close to current levels through the end of this year and into 2021. The Permian — the U.S.’s premier production area — hasn’t been faring much better than the U.S. as a whole. Readers of our Crude Oil Permian report will know that the basin’s production peaked at 4.79 MMb/d in March, then plummeted by 15% to 4.06 MMb/d in May; since then, production has stayed close to flat, averaging 4.15 Mb/d over the past three months.

Even the offshore Gulf of Mexico (GOM), which is normally viewed as a steady-as-she-goes crude oil producer, has experienced more than its share of volatility this year, but only partly due to COVID-19 and its effects. GOM production, which topped 2 MMb/d for the first time ever in August 2019, dropped by 300 Mb/d, or 16%, from March to April of this year as producers shut down wells in response to sharply lower oil prices. The first major cyclone to affect offshore production was Tropical Storm Cristobal, which caused 34% of production to be taken offline. Then, in late August, more than 80% of GOM production was shut down in anticipation of Hurricane Laura (dashed red line in Figure 1). Following Laura, storms continued to batter the Gulf Coast with named storms running through all the letters of the alphabet and breaking into the Greeks. Last week, Hurricane Delta became the 10th named storm to make landfall this season, breaking a record set more than a century ago, in 1916. And Delta was a doozy for the oil patch. More than 90% of GOM production was closed up in advance of the hurricane. (By yesterday, 24% of GOM production was still offline, according to the U.S. Bureau of Safety and Environmental Enforcement (BSEE) — just to pile on, it seems, the coronavirus also plays a role here, as mandatory quarantine measures designed to protect workers create logistical challenges in re-staffing those offshore rigs.)

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