Over the past two weeks, differentials between US Gulf Coast medium sour Crude and Cushing WTI have widened as supply of competitive grades has increased, somewhat compensating for the ongoing loss of Shell’s Mars corridor output following Hurricane Ida’s disruptions in late August. S&P Global Platts last evaluated front-month Mars, now November, on Sept. 24 at a $2/b discount to Cushing WTI, down from a $1.50/b premium on Sept. 8.
Poseidon has weakened to a $3/b discount from a 40 cents/b premium over the same time period, while Thunder Horse has dropped to a $1.95/b discount from a $2.30/b premium. All three grades are on track to meet or exceed pre-Ida standards. According to the US Bureau of Safety and Environmental Enforcement, roughly 295,000 b/d of Crude, or 16 percent, remained offline over a month after 95 percent of US Gulf oil and gas production was shut down near the end of August as the Category 4 hurricane made landfall in Louisiana.
Storms might wipe out up to 55 million barrels of US Gulf Crude production this year, according to S&P Global Platts Analytics, smashing the recent Atlantic hurricane season record of 115,000 barrels per day annualised set in 2020. Shell has stated that production on its Olympus platform will not resume until far into the fourth quarter, and that production on its Mars and Ura facilities will not resume until early 2022.
The West Delta-143 hub is a key chokepoint for transferring medium-sour Mars corridor Crude via the Mars Pipeline network, which moved 484,000 barrels per day in the second quarter. Due to the scarcity of supplies, Mars and other grades rose in price until new suppliers could be secured. Shell announced that the Amberjack Pipeline, which is operated by Shell, is fully operational between Port Fourchon and Clovelly, Louisiana.