The Hurricane Threat! Many oil traders when they think about the impact of hurricanes on the oil market most often focus on the threat to supply. Yet the truth is more often than not hurricanes are more of a threat to demand then they are to supply. That is definitely the case when it comes to Hurricane Earl, not to mention tropical storm Fiona, Hurricane Danielle and a storm to be named later. Earl in particular could do major demand destruction as its path is perilously close to the East Coast. Earl currently is a category 4 hurricane and is expected to graze the tip of North Carolina on Friday at 2 am just as vacationers are planning to arrive for the big three day Labor Day holiday weekend. I am sure many looking at the weather maps may be canceling their plans already as many will not want to chance the storm. In fact cancelation may become more prevalent as storm warnings all up and down the East coast may cause vacationers and beach lovers to stay closer to home! Hurricane Earl could just destroy a lot of holiday weekend travel plans and the gasoline demand that was expected. The oil and gas market was expecting a big increase in travel over last year as AAA projected that the number of Americans traveling this Labor Day holiday weekend would increase 9.9 percent from last year. Now those numbers have to be revised lower as Earl wreaks havoc on demand. These storms will do more damage to demand and unless a new storm gets into the Gulf of Mexico this will be a bearish event.
The heat has been a bullish event for natural gas. Gas rallied back up yet not because of the storms but because of all of the heat in the Midwest. The natural gas market also found support from the energy Information Agency report that showed that natural gas production fell 1.2% between May and June.
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