Hurricanes Delivered A One-Two Punch To OPEC

Robert Boslego - INO.com Contributor - Energies


OPEC’s grand plan to cut production to drain blotted global oil inventories was a miserable failure in the first half of 2017. Total OECD stocks actually rose by about 75 million barrels by end-June from when the deal went into effect beginning in January.

HE Mohammad Sanusi Barkindo, OPEC Secretary General
HE Mohammad Sanusi Barkindo, OPEC Secretary General (c), with Mr. Nader Sultan, Director of the Oxford Energy Seminar (r), and Professor Roger Ainsworth, Master of St Catherine's College. Source: OPEC

But seasonal oil demand shifted into high gear in July and August. Inventories in the U.S., the largest oil consumer and the most data-transparent country in the world, dropped about 35 million barrels, given record-high demand for crude at U.S. refineries and relatively strong mid-summer product consumption.

This brief hiatus to OPEC’s failure to drain stocks in the first half of 2017 was already set to reverse when refineries performed their fall maintenance, reducing crude demand, and the summer driving season came to a close. But the two hurricanes, Harvey and Irma, accelerated the demand-destruction process.

About 3.2 million barrels a day (mmbd) of refinery throughputs were reduced by the Gulf hurricane, while petroleum product demand dropped 1.5 mmbd from the prior week. The impact of Irma on Florida and elsewhere in the Southeast is still uncertain and ongoing. Goldman Sachs has estimated that U.S. petroleum product demand may be nearly 900,000 b/d lower in September, and 300,000 b/d lower in October, as a result of the storms. Crude demand may average another million barrels per day lower due to problems reported at some refineries. Continue reading "Hurricanes Delivered A One-Two Punch To OPEC"

Trump To GOP: Drop Dead

George Yacik - INO.com Contributor - Fed & Interest Rates


As much as I don’t like the fact that President Trump had to make a deal with the Devils – i.e., Democrats – to reach a temporary budget agreement, he did the only sensible thing he could do to avoid a government shutdown. He was able to increase the government’s borrowing limit and get emergency aid for Hurricane Harvey victims, all in one fell swoop.

Rather than wait around for the do-nothing Republicans in Congress to, well, do nothing, Trump agreed to a deal with the likes of Chuck Schumer and Nancy Pelosi to at least get something done that needed to be done quickly. Was it the deal he really wanted? No. Was it the best deal? Probably not. Was it the best deal he could get right now under the circumstances? Probably. That’s politics.

But it might lead to bigger, better and more important agreements down the road, most immediately tax reform, and that was more likely Trump’s primary goal. He knew he couldn’t rely on Republicans for that. Continue reading "Trump To GOP: Drop Dead"

Investing Before Or After A Natural Disaster

Matt Thalman - INO.com Contributor - ETFs


Similar to investing in "Sin Stocks," i.e., alcohol, tobacco, casino, weapons companies, investing with the mindset of making money before or after a natural disaster, such as a hurricane like Harvey that hit Texas a few weeks ago is often a touchy subject.

But, if you are someone who is alright with investing in this 'morally gray' area, or just want to learn about how others pursue it, together we can take a look at how it is accomplished and a few things to be aware of before deploying capital.

First, while every natural disaster can be incredibly devastating, hurricanes typically seem to account for the bulk of the damage here in the US. In most cases, they are the only real disasters which you can invest around because of their predictability, which gives investors a chance to make investments both before and after the disaster occurs.

Since hurricanes occur along the coast, and more often in the gulf coast region, the one industry they seem to affect is the oil industry. This is because a significant amount of oil is drilled for in the Gulf of Mexico and because a large number of the US's oil refineries and oil shipping ports are found in this region. Continue reading "Investing Before Or After A Natural Disaster"

Analysis Of Hurricane Harvey Impacts On The U.S. Oil Industry

Robert Boslego - INO.com Contributor - Energies


Information from the Gulf of Mexico is developing each day, and the extent of damage from Harvey to the energy industry’s infrastructure is still largely unknown as of September 5th. I detail below the potential impacts on supply and demand for crude and petroleum products. I have also contrasted them to supply/demand responses to Hurricane Katrina (2005) followed by Hurricane Rita.

Crude Production

The best data show that about 324,000 b/d is shut down in the Gulf of Mexico (GOM). Also, up to 300,000 b/d of inland production may be affected in Eagle Ford.

Hurricane Katrina made its landfall on August 29, 2005, in Southeast Louisiana, not Texas, as a Category 3 hurricane. It caused significant damage to oil and gas industry infrastructure. It was followed by Hurricane Rita, which made landfall on September 24th, also as a Category 3 hurricane.

The initial impact on crude production was about 1.2 million barrels per day (mmbd). GOM production at that time was about 400,000 b/d lower than the most recent estimates.

U.S. Crude Production
Continue reading "Analysis Of Hurricane Harvey Impacts On The U.S. Oil Industry"