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Gulf Of Mexico Oil Outposts Brace For Battering From Tropical Storm Cristobal

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The U.S. oil and gas industry, already reeling from economic headwinds in the wake of the coronavirus or Covid-19 global pandemic, is bracing for yet more disruption courtesy of an approaching tropical storm.

According to the U.S. National Hurricane Center, Tropical Storm Cristobal which will be lurking over Mexico for the next few days, and has already caused deadly flash flooding there as well as neighboring Central American countries may make landfall stateside by Sunday (June 7) night.

The storm is also expected to pick up strength as it heads north over the Gulf of Mexico. The center said Cristobal is the third major storm to form in the Atlantic this year. That makes 2020's start to the U.S. hurricane season the fastest on record. Gusts of at least 65mph are expected and if such a strength holds, Cristobal will be the second storm to strike the U.S. barely a week into the official hurricane season.

It poses another unwanted worry for the beleaguered oil and gas industry as offshore Gulf production platforms in the storm's path account for 19% of U.S. crude oil production and 6% of dry natural gas production, according to the Energy Information Administration (EIA).

What's more, the Gulf coastline is also home to over 45% of U.S. refining capacity and 51% of natural gas-processing capacity. According to ABC News' spaghetti models for Cristobal, landfall could be anywhere between Houston, Texas and Pensacola, Florida.

Spokespersons for Royal Dutch Shell, BP, Chevron CVX , ExxonMobil, Hess Corp HES and Murphy Oil MUR confirmed the companies were monitoring the situation from Houston, and taking necessary precautions. However, as of now not many operators have made a decision on whether to evacuate personnel from their offshore platforms in the Gulf.  

Onshore refinery operators and port authorities in the states of Texas and Louisiana are on standby to activate their hurricane protocols with the worst expected overnight on Sunday. Both states are home to the five biggest U.S. refineries by volume. These include Aramco-held Motiva Enterprises' Port Arthur, Texas Refinery with a capacity of 607,000 barrels per day (bpd) - the country's largest.

Marathon Petroleum's Galveston Bay Refinery (585,000 bpd) and ExxonMobil's Baytown Refinery (560,500 bpd) also in Texas, and Marathon's Garyville Refinery (564,000 bpd) and Exxon's Baton Rouge Refinery (502,500 bpd) in Louisiana, are other big facilities that could be in the storm's path.    

However, in the event of a disruption such as flooding or infrastructural damage, currently elevated product inventory levels due to mandated Covid-19 lockdowns and demand depression in U.S. Gulf Coast hubs could well cushion the supply chain.

From March 13 to April 24, Gulf Coast inventories increased by 20% or 36.4 million barrels to 221.6 million barrels, according to the EIA. The increase of 10.2 million barrels in the week ending April 10 was the fourth-largest increase in the Gulf Coast region on record.

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