Imports of Russian oil Urals to the U.S. are set to increase in September and October as 77% of U.S. Gulf offshore production remains shut 10 days after Ida made landfall on the Louisiana coast, according to people with knowledge of the situation. Gulf coast refineries looking for oil in the absence of supply from the Gulf are supporting higher prices for medium sour Russian oil that is similar to grades produced in the Gulf of Mexico.
While it’s not uncommon for U.S. fuel makers to buy Urals, the heightened interest in the aftermath of Ida is said to be supporting prices. Urals is trending at a 7-month high, with bids of $1.05 below the Dated Brent benchmark on Wednesday, compared with a discount of $1.95 per barrel before the hurricane hit. Prices strengthened even with the prospect of OPEC bringing more production online.
Ida has knocked out 20.6 million barrels of oil production so far, more than any other storm in the past 13 years. Royal Dutch Shell Plc is still assessing damage to West Delta-143, a critical offshore transfer station that funnels a large portion of Gulf of Mexico crude to the coast. With the platform down, Shell shut the production of medium sour Mars.
As power is restored in Louisiana and refineries restart they will continue to need more crude to resume fuel production. Exxon Mobil Corp’s refinery in Baton Rouge is awaiting more crude oil to restore normal operations. The U.S. Department of Energy is trying to soften the blow from Ida by loaning oil from its strategic reserves. It has loaned so far 1.8 million barrels to refiners including Exxon.