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Report on Business Gulf Coast oil output cut in half as Tropical Storm Barry intensifies

An intensifying tropical storm in the U.S. Gulf of Mexico has prompted petroleum producers to slash more than half the region’s output, with energy companies removing staff from nearly 200 offshore facilities and a coastal refinery.

Oil firms shut more than one million barrels a day (b/d) of oil production, 53 per cent of Gulf of Mexico’s output, and 1.2 billion cubic feet a day of natural gas production, according to a U.S. regulator.

Tropical Storm Barry’s sustained winds were 105 km/h Friday afternoon and were expected to intensify, possibly reaching at least 119 km/h, a Category 1 hurricane, as it nears the coast, the U.S. National Weather Service said.

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As much as 65 centimetres of rain is also expected, with flooding from the rains and a storm surge.

Despite the production cuts, U.S. crude, natural gas and gasoline futures slipped on Thursday after the Organization of the Petroleum Exporting Countries forecast weaker demand for its output next year.

Dozens of oil and gas producers have removed staff from 191 production platforms, according to offshore drilling regulator U.S. Bureau of Safety and Environmental Enforcement. It said seven rigs and 11 drill ships were evacuated or moved out of Barry’s path.

Phillips 66 evacuated staff and halted operations at its 253,600-b/d Alliance, La., refinery and pipeline operator Enbridge Inc. also evacuated three offshore platforms and halted some deepwater Gulf of Mexico natural gas pipelines.

The storm prompted Anadarko Petroleum Corp., Chevron Corp., Royal Dutch Shell PLC and others to move staff out of the path of the storm and many halted production, according to company reports.

U.S. crude futures, which rose more than 4 per cent on Wednesday, settled at US$60.20 a barrel on Thursday, down 23 US cents on the day but near a six-week high. Gasoline futures slipped a fraction.

The National Weather Service issued a hurricane warning for part of the Louisiana coast by Friday night and projected landfall over the state’s central or southeastern coast.

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Data provider Refinitiv said natural gas output in the Lower 48 states could drop to a seven-week low of 87.2 billion cubic feet a day on Thursday due to the closings, from a record high of 91.1 bcf/d on July 5.

A storm surge of up to two metres was expected at the mouth of the Atchafalaya River, according to the National Weather Service.

Phillips 66’s Alliance refinery sits next to the river 63 kilometres south of New Orleans. The most recent hurricane to flood the refinery was 2012’s Hurricane Isaac. The refinery was also shut by Hurricane Gustav in 2008 and Hurricane Katrina in 2005.

In 2017, Hurricane Nate led Phillips 66 to shut the refinery, which was restarted within days as the storm turned away from the area.

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