It’s been a busy week for headlines that are whipsawing energy prices in both the physical and financial markets. After a strong day Thursday, we’re seeing heavy selling this morning in what appears to be optimism that the multiple storms wreaking havoc with prices, whether figurative or literal, will soon pass.
Yesterday the Saudi King met with the Russian President, indicating that the two countries were entertaining the idea of extending oil production cuts among other deals between the two long-time foes who have become friendly in the wake of the oil price collapse 3 years ago.
Meanwhile, the Kurdish independence movement continues to create waves, with Turkey’s President meeting with Iraqi and Iranian officials to discuss how to handle the breakaway, putting ½ million barrels per day of oil exports at risk.
Iran made the news again yesterday as the White House signaled its plans to abandon the Nuclear agreement set in 2015.
The US Dollar index has rallied to a 2 month high this week as fears about the fallout from Catalonia’s attempt to break away from Spain. That rally in the dollar has been cited as a reason for WTI’s return to sub-$50 levels, although as the chart below shows the correlation between the two asset classes has been almost non-existent over the past year.
Tropical Storm Nate is making its way north and is forecasted to hit the Gulf Coast as a category 1 Hurricane Sunday. Evacuations from offshore oil production facilities are underway, and several refineries in the area are expected to begin cutting runs so they can shut down safely ahead of the storm, in an effort to reopen more quickly after it passes. The good news is the storm is moving relatively quickly, meaning rain forecasts are roughly 10% of what we saw with Harvey.
The scary part is that the waters in the Gulf are still above normal temperatures, so it’s still possible that this system could strengthen more than is forecast currently.
The September jobs report showed a decline in payrolls of 33,000, which is believed to be caused the effects of Hurricanes Harvey and Irma.