Oil Under Pressure
With headlines trumpeting a slight downgrade in the status of hurricane Laura, reports that China might have finished its “foreign oil buying binge” and news that US air passenger numbers remain 74% below year ago levels it is not surprising to see crude oil start off under some pressure. In the end we do not expect the hurricane to leave a sustained disruption in place with the markets attention quickly shifting back to the demand side of the equation once the light of day gives some clarification to damage on the ground. It should be noted that US crude oil and gasoline stocks remain well above year ago levels, and therefore a moderate setback in supply might not be as impactful as many might expect.
While the hurricane could surprise us with significant damage to natural gas production and infrastructure onshore, we see that as an unlikely outcome and make note that supplies in the US remain 15.1% above the 5-year average storage levels. We continue to think that the natural gas market is an outright sell with prices losing momentum, forging a quasi-triple high and closing lower in the face of a serious upgrade in the strength of the hurricane yesterday. Furthermore, it should be noted that the storm has fully traversed the physical production areas and export facilities have been constructed to stand up to very serious hurricane force conditions, and therefore it is possible that natural gas will get back to normal much quicker than the petroleum market.
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