The Entire Texas And Louisiana Coastlines Are Under Storm Warnings

Crude oil futures are leading the complex lower this morning as gazes return to the ‘old faithful’ of bearish sentiment: Chinese demand. An economic report released earlier this morning showed the county’s exports rose 8.7% in August, surpassing expectations, but imports slowed to 0.5%. While the former shows global demand is still strong for Chinese goods, the latter bolsters concerns about domestic demand.

OPEC piled on the bearish headlines by giving its oil demand estimates a haircut in its Monthly Oil Market Report. While demand remains strong, above historical average, the aforementioned lackluster Chinese demand outlook, paired with increased Libyan production, points to a global surplus of oil supply. WTI crude oil prices have dropped nearly $5 per barrel so far this month, despite the cartel’s efforts to boost prices by extending their production cuts into November.

Tropical Storm Francine is expected to be upgraded to hurricane status this afternoon as it continues its path towards the Louisiana coast. Its trajectory has shifted slightly eastward overnight, taking the refinery clusters in Port Arthur and Lake Charles out of the anticipated impact zone. The entire Texas and Louisiana coastlines are under storm warnings/watches, but as of now only a handful of refineries in Baton Rouge, Garyville, and Krotz Springs are at risk of a direct hit.

On the other side of the barrel, oil producers have evacuated their staff ahead of Francine’s arrival. Potential disruptions in crude oil production took credit for the 1.5% rise in WTI futures yesterday, however long-term impacts are not expected.

There are two other systems being tracked by the National Hurricane Center, one with a 70% chance of developing into an organized storm over the next week. As of now neither are anticipated to threaten the US mainland.