Dangerous "Dean"

The global oil market is watching a hurricane approaching the Gulf of Mexico

Hurricane Dean, which will approach the Mexican Yucatan Peninsula today or tomorrow, has already made oil traders seriously nervous. After all, production of raw materials in the Gulf of Mexico (where the United States receives a third of total oil production and 15% of gas) fell by 0.8% just last Friday, and all leading oil companies reported the beginning of the evacuation of personnel. Oil prices are not yet significantly affected by hurricane forecasts. On the New York Exchange, September futures for the American standard WTI last Friday rose by only 98 cents, to $71.98 per barrel, and on the London Exchange, Brent oil fell by $1.88 per barrel, to 69.41 dollars, due to the decision of the US Federal Reserve to lower the discount rate.

Hurricanes and storms in the Gulf of Mexico are a common occurrence in August and September. The largest in the last decade occurred in 2005, when a series of hurricanes destroyed oil production infrastructure in the Gulf and caused severe flooding. At the same time, the American-Iranian conflict flared up, and oil prices soared by 5-7 dollars per barrel, to 70 dollars. Last year there were no hurricanes, but this year, as forecasters predict, they are very likely. At the same time, meteorologists believe that Dean, although it will cause serious problems, is unlikely to be as destructive as Katrina and Rita two years ago.

However, Dean, which raged across the Caribbean islands on Saturday as it passed over Jamaica, will intensify not to Category 4 as predicted, but to a maximum of Category 5, the US National Hurricane Center said. At the same time, as stated in a Reuters report, after Jamaica the hurricane will slightly change direction and move to the northern part of the Gulf of Mexico - just into the oil-producing areas. And if earlier it was assumed that “Din” would lose power over Yucatan, now the forecast is the opposite.

These data became decisive for oil traders. On Friday, on all exchanges - both in London and New York - commodity prices initially fell sharply due to reports that the US Federal Reserve had lowered rates by half a percentage point. This eased investor concerns about a slowdown in the US economy. “Investors in the energy sector were worried that any cooling in the economy could mean lower demand for oil and gasoline,” James Cordier, president of Florida-based Liberty Trading Group, told the AP. “But after the Fed’s decision, futures began to rise, as it became clear that prices now actually depend on the behavior of Dean as it approaches the Gulf of Mexico.” Due to the time difference between Europe and America, oil prices did not have time to rise by the time trading closed in London on Friday, but in New York, traders began to win back the news about the hurricane. True, it is not strong yet, since the hurricane is moving at a low speed - only about 35 km/h. Therefore, experts expect that “Din” will determine the weather on the oil market almost throughout this week.

However, analysts point out that the automobile season in the United States is already coming to an end, and therefore the demand for gasoline will not grow and will not drag oil prices upward. At the same time, the hurricane may cause power outages at oil refineries, which will cause fuel shortages.

Russian Urals oil is less susceptible to news that determines the movement of Brent and WTI quotes, and therefore last Friday rose in price by $1.19 per barrel, to $68. This happened, according to analysts, due to a correction in the global stock market.

Nikolay GORELOV