An email from a Minerals Management Service field operations supervisor for the Gulf of Mexico on June 3 saying that the agency had stopped issuing permits to drill in the Gulf regardless of water depth triggered a rally in crude and natural gas futures trading on the New York Mercantile Exchange.
"This came on the heels of a drilling moratorium [the previous] week, which applied to deeper waters," said Peter Beutel, president of New Canaan, Conn,-based risk management firm Cameron Hanover, in a note to clients. "It is estimated that the moratorium could cut about 350,000 bpd of oil and gas production by 2015. A ban on shallow water drilling, though, would have a deeper impact."
In late May, the Obama administration issued a six-month moratorium on deepwater drilling while suspending ongoing exploration at 33 deepwater locations in the Gulf of Mexico because of the growing oil spill. The MMS email suggested that the moratorium was expanded to impact all offshore drilling, with the news picked up by the Associated Press and Washington Post, among others.
Telvent DTN contacted MMS for verification of the report, but was referred to the Office of Interior Secretary Ken Salazar. A press aide at the Interior Department initially said that she could not confirm or deny the report. After repeated attempts to confirm the report, a press aide at Salazar's office denied the report, saying that no changes had been made to drilling rules.
The erroneous news hit the market during afternoon trading, and oil and natural gas futures, which were already rallying following the release of bullish inventory data earlier in the day, soared. During market-on-close trade between 2:00 PM ET and 2:30 PM ET, nearby delivery natural gas futures rallied 1.5 percent and nearby delivery crude oil futures surged 2.3 percent.
"[Thursday's] story may turn out to be inaccurate, but the fact that it was instantly accepted at face value speaks volumes," said Beutel, discussing the market's nervousness over the oil spill.
Later that evening, BP was successful in placing a containment cap over the oil leak according to Gulf Coast Admiral Thad Allen.
Allen said the cap's placement is "another positive development" in BP's attempts to contain the leak.
"It will be some time before we can confirm that this method will work and to what extent it will mitigate the release of oil into the environment," he said. "Even if successful, this is only a temporary and partial fix and we must continue our aggressive response operations at the source, on the surface and along the Gulf's precious coastline."
A containment device would be put in place to capture some of the leak, and dispersants will also be used to neutralize any additional leaking oil.
"It will be kind of a test and adapt phase as we move ahead, but [this is] a significant step forward," Allen said.
In response to requests from Lisa Jackson, administrator for the Environmental Protection Agency, the command is focusing on using as little dispersant on the surface of the ocean as possible and instead concentrating their use in subsea areas where they are most effective. The EPA has been testing dispersants and so far, they have found no impacts on the wildlife related to their toxicity, Allen said.
Late last week, the spill was approaching the southern areas of Mississippi, Alabama, and Florida, with some oil being found in Miss., and tar balls reported on Dauphin Island along with some sheening.
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