Oil prices rose further on Wednesday, with WTI breaking $40 per barrel as Hurricane Sally continues to wreak havoc in the Gulf of Mexico.
More than 27% of all offshore oil and gas production in the GoM remained shut as of Wednesday.
Combined with the crude oil stock draw reported by the Energy Information Administration, the Hurricane sent oil prices up by nearly 5 percent.
At 4:00 pm EDT, WTI was trading up $1.83 (4.78%) at $40.11 per barrel, with Brent crude trading up $1.71 (4.22%) on the day at $42.24 per barrel. It is the first time in nearly two weeks that WTI has breached $40 per barrel.
The category 2 hurricane that made landfall on Wednesday morning near Gulf Shores, Alabama, causing 119 production platforms in the GoM to evacuate personnel—a figure that represents about 19% of all manned platforms in the Gulf, according to the U.S. Bureau of Safety and Environmental Enforcement. The disruptions have taken offline 508,366 barrels of oil production and 805 MMcfd of natural gas production. The shutdowns make up 27.48% of all oil production in the Gulf and 29.70% of all natural gas production in the Gulf.
Further boosting oil prices on Wednesday was the EIA’s report that shows a 4.4 million barrel crude oil inventory draw for last week, but inventories still remain above the five year average as demand continues to be depressed.
The historic rainfall from the hurricane is expected to reach 35 inches, and nearly 400,000 homes and businesses are without power. Atypical for a hurricane, Sally’s slow pace is expected to prolong the duration of high winds and heavy rainfall—and consequently the effect on U.S. Gulf of Mexico oil and gas production.