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Oil and gasoline futures charged to a five-month high as hurricane Laura takes dead aim on the US Gulf coast, which is home of the country’s most considerable refining capacity.

Crude futures are tracking gasoline higher as the US energy complex is fronting catastrophic circumstances. The back to back storms have not only caused producers to shut in 1.5Mbd (>80%) of production in response but also some of the world’s largest refineries have reduced operations or shuttered plants in advance of Laura raising concerns of a potential near-term gasoline shortage.

Still, oil was mirroring a stronger S&P, which shrugged off rising Covid-19 cases globally and reports of a re-infection of a man in Hong Kong.

Given the short-term nature of Gulf Coast storm disruptions, the oil patch will soon turn to the broader markets for support where the reflationary theme is taking hold supported by progress on trade negotiations between the US and China.

While vaccine news also improves oil market sentiment with Moderna planning to provide 80 million doses of experimental COVID-19 vaccine to the EU.

The API inventory draw came in more extensive than expected, as did the gasoline draw. But what would typically be bullish for oil report was met with a muted response as markets are currently pricing in a possible near-term catastrophic gasoline shortage.

The key to near term price movements will be the extent of any damage caused by the hurricanes and then bolstered by the support from broader risk markets once the hurricane price pressure eases, as it always does.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp