Hurricane Nate: Is It Time to Buy US Crude Oil Futures?
Crude oil futures
US crude oil (UWT) (DWT) futures contracts for November delivery rose 0.1% and were trading at $49.63 per barrel in electronic trading at 2:03 AM EST on October 10, 2017. Likewise, the E-Mini S&P 500 (SPY) December futures contracts rose 0.1% to 2,545.25 in electronic trading during the same period.
US crude oil (USO) and Brent (BNO) crude oil prices have fallen 5% from their recent high. Lower crude oil prices have a negative impact on oil and gas producers (XLE) (XOP) like Noble Energy (NBL) and Bill Barrett (BBG).
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The crude oil production in the Gulf of Mexico accounts for 17% of the total US crude oil production. On October 9, 2017, the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement said that the crude oil production in the Gulf of Mexico was offline due to Hurricane Nate. It estimates that 85% or 1.49 MMbpd (million barrels per day) of crude oil produced in the Gulf of Mexico was offline. It supported US crude oil (USO) (UCO) prices on October 5, 2017.
The tropical storm became a hurricane on October 6, 2017, in the Gulf of Mexico. As a result, US oil producers shut down their offshore oil platforms in order to prevent any damage. On October 9, 2017, Hurricane Nate was downgraded to a tropical storm. So, far it didn’t have much impact on the oil infrastructure. US producers could resume their production activity quickly.
Hurricane Nate caused a short spike in oil prices. However, US crude oil production is at a 26-month high. US crude oil (UCO) (UWT) prices have fallen 12.9% YTD (year-to-date) due to high production. Moves in crude oil prices impact energy producers (VDE) (RYE) like Noble Energy and Bill Barrett.
In the next part of this series, we’ll look at how the US dollar impacts crude oil prices.