Oil futures are trading higher today than expected after Hurricane Gustav moved through Louisiana, though they did fall to about $108 a barrel this morning. The majority of New Orleans levees held strong and the hurricane missed vital areas where oil refineries are located, though it did pass through a zone where many oil and gas-producing rigs are located and the LOOP (Louisiana Offshore Oil Port), which is an important facility where ships deliver crude oil, heating oil and gasoline. There has been some visual damage to the facilities, but the extent of the damage is not yet known. (LOOP’s website indicates that it is not operating at this time in a message posted on August 30.) At the present time, 25% of United States crude oil production has ceased and inventory levels are expected to decline until production can be brought back to typical levels.
With two new hurricanes suddenly in the mix, this week’s bulk oil prices look more uncertain. Hurricane Hanna looks to be headed toward the East Coast of the U.S., while Hurricane Ike may be headed toward the Gulf. The best-case scenario is that both hurricanes will reduce the number of ships heading toward LOOP. The worst-case scenario is that Hurricane Ike could delay repair from Gustav’s effects and postpone normal oil production. At any rate, oil and gas prices are bound to be erratic and hard to predict this week.