Hurricane Isaias Threatens Gulf Refineries, Fuel Supply; Jefferies Flags Coca-Cola as Defensive Play

Hurricane Isaias strengthened into a major hurricane Friday as it headed for the U.S. Gulf Coast, putting refineries and offshore oil production at risk and adding to supply concerns already fueled by Middle East conflict, according to industry experts and government data.

November WTI crude oil futures settled up 0.36 cents, or 0.39%, on Friday, while November RBOB gasoline futures closed down 0.208 cents, or 0.63%, as prices traded mixed, according to Nasdaq data. Crude shook off early losses on concerns about disruptions to Middle East energy supplies after Iran said it would retaliate against recent attacks, the same source noted.

The storm is forecast to miss the Gulf Coast’s largest oil hubs but could still nudge fuel prices higher if power outages force refineries to shut down, analysts said. Chevron’s facility in Pascagoula, Mississippi, and Vertex Energy’s refinery in Mobile, Alabama — representing 2.4% of U.S. refining capacity — are at risk of flooding and power outages, said Andrew Lipow, a Houston-based oil analyst. Any extended downtime could take those facilities offline at a time when diesel supplies are already low, he added.

If the storm passes quickly with minimal damage, refineries would run at reduced capacity and gasoline and diesel prices could rise only a few cents, said Carl Larry of energy analysis firm Enverus. But a complete shutdown, particularly at Chevron’s plant, could take weeks to recover and trigger a sharper spike. “Major issues, like a power shutdown, and the prices will spike immediately. It’s possible a dollar,” Larry said. “Those diesel prices that already are above $6 could start approaching $7.”

Other experts downplayed the national impact. Patrick De Haan, head of petroleum analysis at GasBuddy, estimated the at-risk refining capacity at roughly 500,000 barrels per day. “That may have a small impact on gas prices, primarily in the Gulf Coast, but I don’t think it rises to a criteria that would impact gas prices nationally,” he said.

Offshore oil production has already taken a significant hit. Personnel from 129 production platforms — about a third of Gulf of Mexico facilities — were evacuated, according to the federal Marine Minerals Administration. More than two-thirds of Gulf oil production was shut down as a precaution, equal to nearly 1.5 million barrels (61 million gallons) per day. Chevron, BP and Shell were among companies that reported evacuating personnel and shutting platforms. The storm’s impact on oil and gas prices so far is dwarfed by the effect of the Middle East conflict, experts said. Once the storm passes, workers can return to platforms and resume operations quickly barring major damage. “I would expect that the shut-in oil production will probably return pretty quickly within just a couple of days,” De Haan said.

Brent crude, the international benchmark, traded above $104 a barrel Friday, having fluctuated between $96 and nearly $110 over the past month on uncertainty over the war with Iran.

Against this backdrop of supply volatility, Jefferies issued a warning about a potential fuel shock from Hurricane Isaias and identified Coca-Cola as a defensive safe haven for investors, according to a report from Investing.com. The investment bank’s note did not provide further detail in the summary available.

The combination of storm-related refinery risks, already tight diesel supplies, and ongoing geopolitical tensions in the Middle East is keeping energy markets on edge as Isaias makes landfall.