Fear of Oil supply disruption from Hurricane Gustav.

The Oct NYMEX crude oil put in a lower low ($112.36 vs. $113.68) but closed higher at $116.27 (vs. $115.11 the day before), mostly on fear of supply disruption from Hurricane Gustav. Also, OPEC meets Sept 9 and may decide to cut the extra 1 million barrels per day that Saudi Arabia strong-armed it into accepting. But the price rise was illogical in the face of the US Energy Dept reporting that US demand fell in June by 5.6% y/y, a bit less inelastic than we might have thought.

A remaining problem is whether China stockpiled so much ahead of the Olympics that now it needn’t resume the torrid pace of the past year or so.

Oil is trading on the high side at $117.36, still influenced by Gustav possibly becoming another Katrina. It will hit the Gulf around Aug 31, according to the National Hurricane Center.

Bye for Now

Barbara Rockefeller