Energy markets swirled on Monday as investors responded to the immediate disruption of Hurricane Ida while also trying to gauge the economic toll of rising hospitalizations in the United States caused by the coronavirus.
Gasoline futures were 2 percent higher, after climbing more than 4 percent when trading started. West Texas Intermediate oil, the United States benchmark, also jumped at first, but then dropped into negative territory and was 0.8 percent lower Monday morning.
Before Hurricane Ida stormed ashore in Louisiana on Sunday, oil and gas companies shut down more than 90 percent of production in the Gulf of Mexico, making this storm the first of the year to significantly disrupt those industries.
Workers were evacuated from nearly half of the area’s staffed production platforms, federal officials said on Saturday. BP, Chevron, Phillips and Shell were among the companies that closed facilities.
The disruption could affect gasoline prices throughout the region ahead of Labor Day, traditionally one of the year’s high-demand peaks.
“It’s a little speculative to say yet what’s going to happen, but it’s going to be an event,” said Tom Kloza, the global head of energy analysis at Oil Price Information Service. “This could lead to a mini-price spike.”
Analysts at ING said the timing of oil industry’s recovery from the storm could affect prices.
“The big question is, which will make a quicker return — offshore oil production or refining capacity?” the analysts said in a note. “If it is the former, we could start to see a buildup of crude oil inventories,” which could weigh on prices.
Oil prices have slowly recovered from their pandemic depths as economies around the globe reopen from lockdowns and energy demand climbs. But the rise in coronavirus cases caused by the highly contagious Delta variant has threatened an already shaky revival, and the shutdown of oil production in the Gulf of Mexico could further hamper recovery.
The daily average for hospitalized Covid-19 patients in the United States is now more than 100,000, reaching a level not seen since last winter, before most Americans were vaccinated. The European Union is expected on Monday to recommend that member states reimpose travel restrictions on Americans wishing to travel to Europe.
Power companies in southern Louisiana are bracing for significant outages. Cleco and Entergy, two major providers in the New Orleans metro area, said they anticipated widespread flooding and had called up thousands of additional workers and contractors. Entergy warned that customers in the hardest-hit areas “could experience power outages for weeks.”