The week started with oil around $114 a barrel and moving in sympathy with the dollar. The reopening of the BTC pipeline across Turkey kept pressure on prices while the continuing squabble between Russia and the West over Georgia’s breakaway provinces added upward pressure.
As the week progressed weather forecasters became increasing concerned that hurricane Gustav would enter the Gulf of Mexico, strengthen considerably, and head directly for the Louisiana coast threatening much of US offshore production. Evacuation of personnel from US platforms in the Gulf should be completed by Saturday and approximately 1.2 million b/d of US oil production will be shut-in. Refineries along the coast are already making preparations for the hurricane.
The ultimate strength of Gustav will not be known for several days. The official forecast is for a Category 3 storm, but some meteorologists are pointing out that there is so much warm water in the Gulf that minor changes in path could result in a much more powerful storm.
The petroleum industry is better prepared than in 2005 to weather an unusually strong storm. Platforms have been raised and more anchors installed. The recent drop in US gasoline stocks to an unusually low level, however, is a cause for concern. On Wednesday, the EIA reported another 1.2 million drop in gasoline stocks leaving the US at 195 million barrels, within a day or so of the level where shortages could begin. Unlike for crude oil, there is no strategic gasoline reserve so any prolonged shutdown of imports or refineries is likely to have more serious consequences than in 2005.