A jump last week in the US rig count and mixed data on Covid-19 infections (with the US appearing to stabilise while parts of Europe and Asia trend up) are having a muted negative effect on oil this week, thanks in part to the possible disruption from two separate hurricanes moving into the US Gulf Coast region.

WTI prices corrected lower this morning down from the hurricane spike high as the storm effect is taking on a more localized rather than nationwide concern.

The first of two storms, Tropical Storm Marco, weakened enough for the National Hurricane Center to discontinue the tropical storm and storm surge warnings that see a good chunk of the WTI price rise getting walked back.

Storm Laura continues to strengthen, which should keep oil traders on hurricane watch, providing a bid under WTI and a temporary distraction from pivoting to the US rig count rise and Covid-19 concerns.

The markets are now factoring less of a significant pricing event given the current supply cushion. Also, regional demand remains low due to Covid-19 effects in the Sunbelt States, which has fewer people driving as more work from home.

Brent is off last week’s highs above $45/b, but not by much. The benchmark is holding on to its Hurricane induced gains due to possible storm aftermath effects on global oil flows, which could see US refineries boost gasoline demand from Europe.

The real concern for US markets is gasoline shortfalls if refineries remain shuttered due to storm damage.

The key to near term price movements will be the extent of any refinery damage caused by the hurricanes balanced against the bearish signal sent by the rig count increase.

While OPEC+ remains intent on keeping the market relatively tight, the potential for US production to trend upward remains a risk to the near-term view.

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