US Gulf oil shutting in ahead of hurricane: Update

Adds latest advisory and daily crude trading data.

The prospect of a major hurricane sweeping through the northeastern US Gulf of Mexico later this week is spurring oil producers to shut in some output.

The storm system, which was still developing 105 miles southwest of Grand Cayman in the Caribbean Sea as of 5pm ET, is expected to intensify into a major hurricane before it approaches the northeastern Gulf Coast on Thursday, according to the National Hurricane Center. A major hurricane is classified as having winds of at least 111mph.

Tropical storm watches have been issued for the Lower Florida Keys and Dry Tortugas, while the potential for life-threatening storm surge and damaging hurricane-force winds along the coast of the Florida panhandle and the Florida west coast is increasing, the center said.

Shell said on Sunday it was preparing to shut in production at its Stones and Appomattox facilities off the coast of Louisiana, and has already started to evacuate non-essential personnel from assets in the Mars corridor, which includes platforms that feed into the Mars pipeline system.

"We are in the process of safely pausing some of our drilling operations and currently have no other impacts on our production across the Gulf of Mexico," the company said in a statement.

Production from Appomattox feeds into the Thunder Horse crude stream. In the spot market today, the sour grade was bid and offered in a wide range between 10-70¢/bl under the October light sweet crude benchmark in Cushing, Oklahoma. It traded ahead of the weekend at a 50¢/bl discount.

Stones production is carried to US Gulf coast refineries by vessel. Recent tracking data shows recent shipments being sent to the Pemex Deer Park, Texas, refinery.

Key US Gulf medium sour Mars traded in the spot market for October at $1.75-$1.95/bl discounts to the Cushing basis, rising slightly from $1.90-$2.05/bl discounts to end last week.

The Stones floating production, storage and offloading (FPSO) vessel can handle up to 60,000 b/d of oil and 15mn cf/d of gas, while the capacity of the Appomattox semi-submersible platform is around 175,000 b/d of oil equivalent (boe/d).

This year's hurricane season has already been active. More than 40pc of oil output in the Gulf of Mexico was halted earlier this month after Hurricane Francine barreled through the region before making landfall in southern Louisiana. The offshore Gulf of Mexico accounts for around 15pc of total US crude output and 5pc of US natural gas production.

The center of the system is forecast to pass between the Yucatan Peninsula and the western tip of Cuba late Tuesday, before moving into the southern Gulf of Mexico on Wednesday. It will then accelerate northward across the eastern Gulf of Mexico.

By Stephen Cunningham and Amanda Smith