Tropical Storm Barry raises chem prices as more oil rigs shut in

Author: Al Greenwood

2019/07/12

HOUSTON (ICIS)--Tropical Storm Barry's passage through the Gulf of Mexico has caused commodity chemical prices to rise because of higher crude prices, caused by companies shutting in oil rigs.

The following table compares Monday's prices of several hydrocarbons and petrochemicals with those on Friday, according to the ICIS noon snapshot.

Product Mon Noon Fri Noon Change
Brent September 64.43 66.77 2.34
WTI August 57.77 60.35 2.58
Gasoline RBOB August 1.9088 1.987 0.0782
Natural Gas August 2.382 2.47 0.088
Ethane 13.75 16.75 3
Propane 46.5 48.625 2.125
Benzene 2.61 2.86 0.25
Toluene 2.71 2.815 0.105
Mixed xylenes 2.615 2.76 0.145
Ethylene 13.5 15.5 2
Propylene 38.25 39 0.75

Oil is listed in $/bbl; gasoline in $/gal; natural gas in $/MMBtu; ethane and propane in cents/gal; aromatics in $/gal; olefins in cents/lb

Prices are rising in part because oil prices are rising. Oil prices are rising because of Tropical Storm Barry.

Throughout the week, oil companies have been shutting in production in the Gulf of Mexico, lowering production in an area that accounts for 17% of all the crude produced in the US, according to the Energy Information Administration (EIA).

The following table summarises the shut-ins and evacuations made in preparation of Barry. Oil is listed in bbl/day and natural gas is in millions of cubic feet/day.

Total Evacuated Percent of Gulf Production
Platforms   257  38.42%
Rigs  10  47.6%
Total shut-in Percentage of Gulf Production
Oil, Shut-In  1,110,135  58.74%
Gas,Shut-In 1,353.59  48.69%

Barry should make landfall on Saturday as a hurricane in the state of Louisiana, as shown in the following map.

Source: National Hurricane Center

Because Louisiana has so many refineries and petrochemical plants, the storm could still cause more disruptions.

The state is an important source of several petrochemical, accounting for more than 40% of total US production for some products. The following tables show the biggest chemicals produced in the state.

Chemical % of capacity in Louisiana
Styrene 49%
Ethylene Dichloride (EDC) 47%
Vinyl Chloride Monomer (VCM) 46%
Polyvinyl Chloride (PVC) 43%
Caustic Soda 42%
Chlorine 42%
Ethylene 26%
Propylene 23%
Polyethylene (all grades) 22%
Benzene 18%
Polypropylene (PP) 17%
Butadiene (BD) 17%
Mixed Xylenes (MX) 11%
Toluene 8%

Source: ICIS Supply & Demand Database

While many chemical plants are in the western part of Louisiana in Lake Charles, several others are near the Mississippi River in Baton Rouge, Geismar and Plaquemine. The projected path of Barry could expose these parts of Louisiana to a lot of rain.

The following map shows the locations of some of the chemical plants and refineries in Louisiana. A full list can be found on the ICIS Supply & Demand Database.

So far, most chemical producers contacted by ICIS plan to ride out the storm without shutting down their plants. The only confirmed shutdown is the Phillips 66 Alliance refinery in Belle Chasse, Louisiana. It can process 247,000 bbl/day of crude.

Even if the plants remain producing during the storm, Barry can still disrupt chemical markets by gumming up logistics.

Rains could flood roads, preventing employees from showing up for work.

High water could prevent plants from receiving feedstock or shipping out finished product.

Rail traffic has already been disrupted. Flood gates have been closed, causing rail companies to detour traffic around New Orleans.

BNSF is holding all trains bound for New Orleans from moving into the area. The New Orleans Public Belt Railroad is no longer accepting inbound traffic. This is the switching railroad that serves the port of New Orleans and other local industries.

Norfolk Southern said it is working with interline partners to detour over alternative routes where possible. The rail line also is taking steps to prepare for any floods caused by the storm, with the company working with customers to identify switching needs.

Union Pacific will also reroute traffic moving through New Orleans and has placed embargoes for that city and for Avondale, the company said.

Kansas City Southern said it will ship through detours if they are available.

The port of New Orleans has closed as rainfall on an already high Mississippi River has caused flooding in the city.

Other ports are on alert.

Other disruptions could come from winds knocking down power lines, and that could cause chemical plants to shut down.

As of 1300 hours local time (1800 hours GMT), Tropical Storm Barry was about 105 miles (170 km) west southwest of the Mississippi River, according to the National Hurricane Center. Maximum sustained winds were 65 miles/hour.

A hurricane warning was in effect from Intracoastal City, Louisiana to Grand Isle, Louisiana, the centre said. A storm surge warning was in effect from Intracoastal City to Biloxi, Mississippi as well as for Lake Pontchartrain.

Click here to view related stories and content on the Tropical Storm Barry topic page.

Additional reporting by Jessie Waldheim and Anna Matherne
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