Crude oil prices are just shy of $50.00 as Hurricane Matthew is barreling toward the East Coast. U.S. oil supply continues to fall and OPEC and non-OPEC oil producing nations are getting ready to meet in Istanbul to hammer down details of a joint oil production cut.
Massive evacuations are expected to expand along the East Coast as Hurricane Matthew, a major threat to life and infrastructure, barrels down. For energy, the track of the storm looks to be a bigger threat to demand than supply but in the near term, it will further reduce US oil supply that has fallen at a historic pace over the last 5 weeks. Oil tankers are being diverted to other ports or will wait out the storm and that could delay imports by as little as four days or in some cases, it could be weeks. Gulf cargoes may end up in New York harbor but as the storm moves north, supply into New York Harbor will be challenged as well.
This will further drawdown U.S. crude supply, which fell by 2.98 million barrels bringing stocks back to their lowest level since January. While supply is still at a historically high level for this time of year, strong U.S. demand and rising U.S. exports are cutting down the glut. The trend will continue even as refined rates are falling due to maintenance, making the outcome of the Istanbul meeting that much more important.
MarketWatch reported, “members of the Organization of the Petroleum Exporting Countries plan to meet with other major oil producers from Oct. 8 to Oct. 13 in Istanbul to discuss details surrounding OPEC's preliminary pact to cut crude-oil production, Reuters reported late Wednesday. The news agency cited comments from Algerian Energy Minister Nouredine Bouterfa to local Ennahar TV, in an interview scheduled to be broadcast on Thursday.” So if we see a strong show of unity come out of that meeting and perhaps a pledge to further reduce production, oil prices could see another leg higher.
Bloomberg is reporting that, “An agreement among OPEC and non-OPEC states to limit oil production could slash global supply by 1.2 million barrels a day and add as much as $15 to prices, said Venezuelan Oil Minister Eulogio Del Pino.Members of the Organization of Petroleum Exporting Countries would collectively cut output by 700,000 barrels a day under the accord hashed out last week in Algiers, while non-OPEC states would reduce production by another 500,000, Del Pino said in an e-mailed statement Tuesday. The deal, which will remain in effect for six months, will boost oil prices by $10 to $15 a barrel above the average September price, he said.”
Natural gas is moving on Matthews track. When Matthew’s expected track moves closer to land, gas falls on demand destruction concerns. If the storm tracks off land, then natural gas rallies as demand would perhaps rise. We saw that yesterday and we may see that again today.