Hurricane Florence, which is moving towards the U.S. East Coast, helped push prices higher today and will continue to act as a tailwind for West Texas Intermediate until at least Thursday, based on the latest updates from the National Hurricane Center.
The NHC said that the hurricane might strengthen further, reaching Category 5 before making landfall, and warned that “A life-threatening storm surge is likely along portions of the coastlines of South Carolina, North Carolina, and Virginia, and a Storm Surge Watch will likely be issued for some of these areas by Tuesday morning.”
Another two storms are developing in the Atlantic—hurricane Helene and tropical storm Isaac—but are yet to make an entrance near the U.S. coast.
Last week, tropical storm Gordon shut in oil production amounting to 160,000 bpd for several days as it passed through the Gulf of Mexico. That represented about one-tenth of total oil production in the GOM.
Unlike the 2017 hurricane season that caused serious production outages in the Gulf of Mexico and at Gulf Coast refineries, this year’s hurricanes are thought to be fewer and weaker. Colorado State University recently revised its forecast for the number of named storms this season to 11 from 14, as per a Bloomberg report from July.
Still, any hurricane approaching the U.S. coast will affect prices in the current supervolatile state of the market, with demand concerns adding to the already high geopolitical risk premium.
On the headwind side are the sanctions on Iran, which are scheduled to enter into effect in early November and are already pulling oil prices higher as market players continue to doubt that other producers’ capacity will be able to make up for all the lost supply from Iran.
On the other side, there are those who are worried that demand for crude may be approaching a seasonal slowdown after the end of summer driving season and the beginning of refinery maintenance season.
By Irina Slav for Oilprice.com
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