Gustav to gain hurricane strength towards US Gulf

29 August 2008 11:29  [Source: ICIS news]

LONDON (ICIS news)--Tropical Storm Gustav swept over Jamaica on Friday morning, heading for the US Gulf coast where it was expected to hit with hurricane strength, sparking fears of devastation similar to that caused by Hurricane Katrina.

Gustav ripped off roofs in the eastern parish of Portland on Jamaica, according to local media reports. It has been blamed for at least 68 deaths in the Caribbean so far.

US forecasters said it could hit New Orleans and Gulf of Mexico oil fields as a hurricane next week.

The National Hurricane Center said at 05:00 eastern time (09:00 GMT) on Friday that the centre of Gustav would leave Jamaica in the next few hours at maximum sustained winds of 65 miles/hour and approach western Cuba on Saturday, when it could become a Category 2 or perhaps a Category 3 hurricane.

Gustav was forecast to make landfall on the coast of Louisiana late on Monday.

Traders recalled the memory of Hurricane Katrina in 2005, which pushed oil prices to record highs and also saw petrochemical production in the US and major shipping routes disrupted. 

Spot benzene in Europe had shot up as much as $180/tonne in the week ending 2 September 2005 on the back of surging oil prices and spot values in the US. 

With as much as 25,000 tonnes of benzene making its way to the US from Europe on an arbitrage window which had been open earlier in August, the storm could disrupt supplies to an already tight US market, said one aromatics trader.

“There is a lot of petrochemical production in Louisiana, and when Katrina hit, downstream production in Louisiana was also impacted, and a lot of chemicals from refinery and downstream were tight globally for a while after,” said another aromatics trader.

Fertilizer market participants, meanwhile, discussed the “massive disruption” seen in their markets as US production was severely impacted for several months after Katrina.

One chemical shipping trader said there would be delays in the region but should the hurricane prove to be a category four or five then a repeat of Hurricane Katrina was a possibility.

“We haven’t been advised of anything yet as there is still some time before the hurricane hits the US Gulf but if it is as strong as experts are speculating then it could be a disaster all over again.”

Another chemical shipping broker was concerned of potential disruption to ports in the region.

“The port of New Orleans will experience delays but if the hurricane covers the whole of the US Gulf then it will disrupt all positions,” the broker said.

There are more than 4,000 oil and gas installations in the Gulf. In 2005, Katrina and Rita destroyed 109 oil platforms and five drilling rigs.

Oil and chemicals companies said on Thursday that they were preparing for the possibility that Gustav could hit installations and plants in the next couple of days.

Peter Salisbury and Dan Horlock contributed to this story
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By: Hilde Ovrebekk
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