Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
+ Show blog menu



Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
Expand November <span class='blogcount'>(26)</span>November (26)
Expand October <span class='blogcount'>(24)</span>October (24)
Collapse September <span class='blogcount'>(33)</span>September (33)
EURUSD hovers around 1.1800 - AM Briefing
29 Sep 2017
Trump tax reform lifts Wall Street - AM Briefing
28 Sep 2017
What is the Fed trying to tell us? - PM Bulletin
27 Sep 2017
Yellen struggles with inflation - AM Briefing
27 Sep 2017
Can cable’s rally continue? - PM Bulletin
26 Sep 2017
Investors jittery after North Korean threat - AM Briefing
26 Sep 2017
EURUSD slips again - PM bulletin
25 Sep 2017
Merkel scrambles to form coalition - AM Briefing
25 Sep 2017
Caution ahead of weekend - AM Briefing
22 Sep 2017
Fed Meeting Post-Mortem - Video Update
21 Sep 2017
Fed signals another rate hike - AM Briefing
21 Sep 2017
Trading subdued ahead of Fed meeting - Video Update
20 Sep 2017
Fed expected to reduce balance sheet - AM Briefing
20 Sep 2017
FOMC and balance sheet reduction - PM Bulletin
19 Sep 2017
Dow hits fresh record high - AM Briefing
19 Sep 2017
EURUSD continues to trend higher - PM Bulletin
18 Sep 2017
Global indices storm higher - AM Briefing
18 Sep 2017
Investors shrug off NK missile test - AM Briefing
15 Sep 2017
Sterling soars after BoE meeting - Video Update
14 Sep 2017
Bank of England meeting in focus - AM Briefing
14 Sep 2017
Look-ahead to the BoE monetary policy meeting - Video Update
13 Sep 2017
Sterling bounces as inflation picks up - PM Bulletin
12 Sep 2017
Wall Street rally lifts sentiment - AM Briefing
12 Sep 2017
Euro storms higher - AM Briefing
08 Sep 2017
ECB meeting in focus - AM Briefing
07 Sep 2017
EURUSD soars during Draghi’s press conference - Video Update
07 Sep 2017
ECB meeting, a look-ahead to Thursday - Video Update
06 Sep 2017
Wall Street wobbles, but closes off lows - AM Briefing
06 Sep 2017
WTI recovering as clean-up continues - PM bulletin
05 Sep 2017
Investors shrug off North Korean threat - AM Briefing
05 Sep 2017
North Korean nuclear test boosts gold - PM Bulletin
04 Sep 2017
North Korea rattles markets - AM Briefing
04 Sep 2017
High hopes for the latest US jobs release - AM Briefing
01 Sep 2017
Expand August <span class='blogcount'>(26)</span>August (26)
Expand July <span class='blogcount'>(32)</span>July (32)
Expand June <span class='blogcount'>(28)</span>June (28)
Expand May <span class='blogcount'>(35)</span>May (35)
Expand April <span class='blogcount'>(31)</span>April (31)
Expand March <span class='blogcount'>(38)</span>March (38)
Expand February <span class='blogcount'>(36)</span>February (36)
Expand January <span class='blogcount'>(39)</span>January (39)
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


The question now is how quickly can this refining capacity be brought back online, and this in turn will depend on the degree of flood damage to the refineries themselves.

The outlook for crude oil has been complicated by the devastation caused by Hurricane Harvey and the ensuing flood damage. A quick look at the oil charts for the period showed relatively little day-to-day movement for Brent which has been effectively range-bound since the beginning of August. The front-month Brent contract closed out last month pretty much where it ended in July and has done little since. In contrast, WTI fell over $4 in August for a loss of around 8%.

Of course, it’s a feature of the oil market that there are many different types of crude traded around the world. Brent and WTI are the two main exchange traded contracts with the most speculative interest. The Brent Blend is a combination of crude from a number of oil fields in the North Sea and is the main benchmark for crude oils in Europe and Africa. WTI (West Texas Intermediate) is the main benchmark for North American crude, those oils which are extracted from the US then sent and stored to hubs such as Cushing, Oklahoma. It is of course WTI which has been affected by the terrific flooding of Texas and Louisiana. The storms which swept across the Gulf Coast led to the loss of around 20% of US refining capacity. This saw gasoline prices spike higher, but it also meant that there was a drop-off in crude demand as refiners were unable to process fresh supplies.

The question now is how quickly can this refining capacity be brought back online, and this in turn will depend on the degree of flood damage to the refineries themselves. This could be anything between a couple of weeks to maybe two months.  While we’re already seeing the gradual restart of some refineries in the Gulf, and a modest pick-up in WTI as a result, difficulties remain. Motiva, the US’s largest oil refinery remains closed and sources believe it could take another fortnight before it can fully reopen.


Chart courtesy of

But there are other questions over US supply, and that’s before traders return to considering the success (or otherwise) of self-imposed output cuts from OPEC and non-OPEC producers in supporting prices. US shale production has picked up sharply over the past twelve months. At the beginning of the summer the Energy Information Administration (EIA) was predicting that the US will be producing around 10 million barrels per day (bpd) by year-end. This would represent a tremendous increase from the 8.9 million bpd drilled in 2016 and would easily surpass the country’s 1970s record of 9.6 million bpd. However, the latest EIA data suggests that the agency may have been too bullish in its outlook for US output. The EIA’s monthly report, while delayed, provides a more accurate insight into US production than the weekly figures. The most recent comparisons suggest that the EIA may have been overestimating US production by around 200,000 bpd. If so, then output may be closer to 9 million bpd than 10 million by year-end. This in itself could support oil prices for the rest of this year.


Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. As a marketing communication it is not subject to any prohibition on dealing ahead of the dissemination of investment research, although Spread Co operates a conflict of interest policy to prevent the risk of material damage to our clients.”


Posted by David Morrison

Category: PM Bulletin

Add a comment Add comment            


© 2018 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.