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Offshore oil production cut as tropical depression heads to Gulf Coast

A satellite image taken August 29, 2016.
Source: NOAA | Reuters
A satellite image taken August 29, 2016.

A tropical depression sweeping toward the U.S. Gulf Coast has forced a reduction in oil production in the Gulf of Mexico by more than 10 percent.

Operators shut down about 11.5 percent of oil production and 5.5 percent of natural gas output in the gulf by midday on Monday, according to the Bureau of Environmental Safety and Enforcement.

The shut-ins are a common measure to taken for safety and environmental reasons, the bureau said. Personnel had been evacuated from just six of the 781 production platforms in the Gulf of Mexico, while a handful of other types of rigs had also seen evacuations.

The drillers were responding to Tropical Depression 9, a weather system with sustained wind of 35 miles per hour that is drenching Cuba with torrential rain. The National Weather Service said it would likely issue a tropical storm warning for Florida on Tuesday.

Path of Tropical Depression 9 and Gulf rigs



Only rigs in the southeastern reaches of production areas were expected to be affected as the storm makes an anticipated U-turn through the gulf on its way to Florida. Just a few rigs appeared to be in an area with a 30 to 40 percent chance of seeing tropical storm winds, according to analysis of Energy Information Administration data by Bespoke Weather.

"Out of an abundance of caution, we are seeing reports of rigs shutting in production due to the storm, but would be surprised to see it total more than 10-15% of rigs for a day or two, and thus expect the market impact to be relatively muted," Bespoke Weather founder Jacob Meisel said in an email to CNBC.

Oil prices were higher in morning trade, but turned sharply lower after the dollar spiked as consumer confidence data rose to the highest level in nearly a year.