The US Gulf Coast energy industry was assessing the impacts of Hurricane Laura and deciding when to begin re-opening after the storm swept through the area overnight.
Oil prices slipped after Hurricane Laura ran roughshod through Louisiana. Gulf Coast energy infrastructures were mostly spared the brunt of the damage with traders now anticipating Gulf of Mexico shut-in production to return within days given the impairment was not as bad as expected.
It could be a short-term negative for oil prices.
Also, oil traders reacted less favourably to US Fed Chair Powell’s Jackson Hole speech as there was not enough meat on the reflationary bone he served up.
Unless there is any lasting damage to oil production infrastructure, it would not be a surprise to see oil trade down a bit after the storm as damage assessment continues.
And while the Energy Information Administration (EIA) reported an extremely bullish draw in both oil and gasoline, government agencies are still tabulating the degree of economic carnage left in the wake of the hurricane.
Depending on the extent of damage, it could disrupt both regional business activity as well as consumer mobility over the short term. And the hurricane after-effects might even disrupt people’s travel plans for Labour day weekend given the Gulf Coast is a prime vacation spot for much of the South East USA.
All slightly negative for oil prices over the near term.
On the positive side of the ledger, US rig count dropped by seven to 282, which alleviated some concern about US production returning.
A weak US dollar outlook and generally improving macro backdrop coupled with the oil price favourable” back to school” employment and gasoline demand bump into September could ensure an optimistic medium-term view remains intact.
But traders remain concerned about the near-term impact of easing OPEC+ cuts and rising US production.
Traders continue to get jittery whenever prices try to carve out a new higher range, especially in the context of the northern hemisphere countries moving into the colder months where social activity shifts indoors, and virus cases could jump.
Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp