Oil Market Faces Elevated Hurricane Risk
By Jake Lloyd-Smith, Bloomberg Markets Live Commentator and Reporter
The most consequential event for the oil market this week may come on Tuesday, but not from the battlefields of Ukraine or a high-profile analyst talking the talk.
With WTI more than 40% higher YTD on the fallout from the invasion, rising demand, and tight product markets, another bullish risk comes to the fore: Atlantic hurricane season looms and the National Oceanic and Atmospheric Administration is set to issue its initial outlook.
It could be a difficult few months, with scope for interruptions to offshore supply, as well as to refinery operations. President Joe Biden — who’s already ordered a vast SPR crude release as oil prices rallied — has warned “another tough hurricane season” awaits with storms that’ll be more intense.
Separately, early projections from Colorado State University and AccuWeather suggested a rough ride.
Officially, the hurricane season starts on June 1, beginning at almost the same time as the US summer driving season, which will elevate gasoline and diesel demand.
[ZH: As if right on cue, the National Hurricane Center has spotted a pre-season tropical disturbance in the Gulf of Mexico already. NHC said the system is located over the north-central Gulf of Mexico and has a very low chance of strengthening into a named tropical storm. It is expected to move inland over the central Gulf coast early this week. ]
Stockpiles of both key fuels are low and falling, with prices rallying to records.
Given all the risks, it’s unlikely those prices have yet topped out.
