Written Commentary
NATURAL GAS
While we can’t discount the potential disruption of natural gas production in the Gulf of Mexico over the coming days, the markets reaction to the current threat seems to be a little outsized when one considers the last weekly US gas storage report showed a 15.1% surplus to 5 year average storage levels and given the moderate wind speed of Laura at present. On the other hand, the storms are both expected to traverse a large number of gas platforms in a sequential pattern and downtime could be notable.
CRUDE OIL
With tropical storm Laura expected to become a major hurricane tomorrow and Chinese crude oil imports from the US reached a new record in July of 3.6 million tons, the initial price action in crude oil should be a little discouraging to the bull camp. Certainly, a large amount of US crude oil production has been idled (84%) due to the removal of personnel from a large area of the Gulf of Mexico it would appear as if the trade is more concerned about the loss of fuel supply in the event of massive flooding and the closure of US refineries. Surprisingly (despite weather induced production losses in the US and a pause in US seaborne transportation) US WTI overnight saw its discount to Brent crude oil expand to the highest level since July 30th and that could facilitate more US exports ahead.
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