Tropical Storm Debby played havoc in the Gulf of Mexico shutting down 23% of oil and Gas production. Of course because of the Shale gas revolution 23% just is not what it used to be. Back in 2005 Gulf of Mexico offshore production accounted for about 30% of US oil production and 17% for us natural gas production. Now it only accounts for 20% of US oil production and the real shale bonus is in gas where gulf production only accounts for 6% of natural gas production. More production on lands means the economy has less risk from the forces of Mother Nature especially a storm like Debbie that just seems to be slowly moving across the Gulf of Mexico churning up trouble. And the impact on the economy will be less as supply of oil and gas are more than ample with crude supply near a 22 year high and natural gas supply at a record for this time of year.
That of course does not mean that Debby won't have an impact. The possibility of flooding could slow refining and imports into the Gulf of Mexico will be delayed by days and weeks. Oil which is being pressured by European fears and weak demand you see the natural gas less impacted by European fears rising. Bloomberg reported that George Soros warned that a failure by European Union leaders meeting this week to produce drastic measures could spell the demise of the bloc's shared currency. Developed economies are running into the limits of monetary policy, the Bank for International Settlements said in its annual report yesterday and other issue that could hurt demand expectations and increase the value of the dollar as money seeks safe haven away from the dark clouds of Europe.
This week we should see crude supply increase by 2.5 million barrels Gas supply should rise by 1 million distillates by 1.5 runs steady. Next week Crude supply should fall.
We are seeing natural gas become impacted getting a boost from Debbie. Add to that the forecast for more heat should give the gas bulls some reasons for being. Besides that the natural gas market will be less impacted by dollar safe-haven buying. Heat and the lack of rain is also impacting grain markets as beans and new crop corn are rallying. Maybe Debby will bring some relief yet it seems to be too far out and too weak to be a drought breaker.
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