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Ida: Gas, LNG, oil prices & GRM up, but petrol cracks down

Category four hurricane Ida that hit Louisiana on 29-Aug’21 led to shutdown, of 1) 15.1% of US oil and ~3% of US gas output, 2) 13% of US refining, and 3) 16% of US ethylene, 21% of polyethylene (PE), 41% of PVC and 9% of polypropylene (PP) capacities. As of 1-Sep, 80-83% of oil & gas output, 74% of refining and 80% of petrochemical capacities remain shut. WTI and Brent were up US$3.4-3.5/bbl (5%) from lows last week, but are down 2-1% from peak. Henry Hub (HH), TTF, UK NBP and JKM spot LNG are up 10-21% from lows of last week, but there are also other factors at play. Reuters’ Singapore GRM is up US$1.2/bbl on 1-Sep vs levels on 23- 26-Aug driven by rise in fuel oil, diesel and jet fuel cracks; petrol cracks are down.

* Hurricane Ida shut oil & gas output, refineries & petrochemical plants: Category four hurricane Ida hit Louisiana on 29-Aug’21. It led to shutdown of 1) at peak 1.74m b/d, which was 95.65% of oil output in the Gulf of Mexico (GoM) and 15.1% of total US oil output; 2) at peak 2.11bcf/d, which was 94.5% of gas output in the GoM but just ~3% of US gas output; 3) 2.3m b/d, which is 13% of refining capacity in US, and 5) 6.5mmtpa ethylene, 5mmtpa PE, 3.4mmtpa PVC and 0.8mmtpa PP, which are 16%, 21%, 41% and 9%, respectively, of total US capacities.

* 12.7% of US oil & 2.7% of gas output still shut: As of 1-Sep’21, 1.46m b/d or 80% of GoM and 12.7% of US oil output and 1.88bcf/d or 83.2% of GoM and 2.7% of US gas output shut by Ida, still remain shut.

* 9% of US refining capacity still shut: 1.7m b/d or 9% of US refining capacity was still shut as of 1-Sep’21. Two refineries that have started will not produce at full rates for several days.

* 5-41% of US petrochemical capacity still shut: Hurricane Ida shut 15.7mmtpa capacity including 6.5mmtpa ethylene, 5mmtpa PE, 3.4mmtpa PVC and 0.8mmtpa PP capacity. 3.1mmtpa capacity including 1mmtpa ethylene, 1.7mmtpa PE and 0.4mmtpa PP capacity is restarting. Thus, still 14% US ethylene and PE, 4.7% of PP and 41% of PVC capacities remain shut.

* Gas & LNG surge but other factors also at play; GRM rise driven by FO, diesel and jet fuel cracks while petrol cracks down: WTI and Brent at peak were up US$3.4-3.5/bbl (5%) vs levels on 23-Aug’21 but are down 2-1% from peak. HH and JKM spot LNG prices are up 18-10% (US$0.72-1.68/mmbtu) to US$4.6-18.0/mmbtu while UK NBP and Dutch TTF prices are up 20-21% (US$3.1-3.0/mmbtu) to US$17.6-17.5/mmbtu.

* Rise in European gas prices is also driven by Russia guiding modest gas supply to EU in H2CY21 and rise in EU carbon prices. Singapore GRM, which was US$2.62-2.9/bbl in 23-26-Aug’21, is up to US$3.94/bbl on 1-Sep’21 with fuel oil, jet fuel and diesel cracks being the main driver, but petrol cracks are down modestly; petrol cracks may be down as widespread power outages have led to retail petrol station closures in impacted areas. We believe petrochemical margins may rise if capacities take time to restart with PVC margins likely to gain the most; several PVC producers have announced force majeures.

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