Unfortunately Gustav did not miss the oil patch. The category 3 hurricane took a left turn just before going ashore and that drove it right through the most heavily populated portion of the oil patch.
According to the government's Minerals Management Service 96% of all gulf oil was shut in prior to the storm and 50% of natural gas. The Louisiana Offshore Oil Port or LOOP is where those very large crude tankers offload their crude for the refineries in Louisiana and points north. The LOOP was shutdown prior to the storm and that will account for 50% of our import capability. With the 1.4 mbpd of gulf oil shutdown and 4.5 mbpd of import capacity this should severely deplete existing inventories IF they are down for more than a day or two.
The 4000+ oil platforms in the gulf were taking a tremendous beating on Sunday but it is far too soon to know the extent of any damage. Until Gustav moves onshore Monday morning and the outer bands disintegrate over the gulf the oil companies cannot begin doing their fly overs to see if there is anything left to send workers back to. After Katrina and Rita there were many rigs that completely disappeared only to be found later many miles away and lying on the bottom.
Once the wind clears every available airplane and helicopter will be pressed into service to fly a pre planned route to put eyeballs on as many platforms as possible. Once they are confirmed to exist the next round of flights will be helicopters putting a few key people on as many rigs as possible to check for damage. Once they pronounce them seaworthy the boats with workers will begin to swarm the gulf as more than 15,000 full time workers start to pickup the pieces.
If everything went perfectly it would take a week or two to restart everything. Every pipeline has to be tested for pressure. Every rig has to be reconnected to the well and to the pipelines. They are disconnected before the hurricane in case the rig loses its moorings they don't want the pipelines drug all over the gulf or the well ripped out of the seabed. One monster rig was blown 160 miles during Katrina. How would you like to be the executive in the spotter plane and find that your billion-dollar rig is nowhere to be found? They have been adding radio locator beacons to those that float so they can be tracked if they are not where they are supposed to be after the hurricane.
We will be talking about Gustav and the damage to the gulf for weeks to come but traders don't appear too concerned about the outcome. Crude spiked to $118 at the open but declined back to $116 by 5:AM Monday.