We're now in wait-and-see mode, ... There was a pull-back after Katrina went through, but early indicators are certainly that some damage has been done.
It's not out of the question that 80 dollars could be the next barrier if there's long-term damage.
We're now in wait-and-see mode. It could be weeks before we know the full extent (of damage), but given how easily $70 was reached, it's not out of the question that $80 could be the next barrier if there's long-term damage.
If there's significant damage, and flooding persists, then there's every possibility that these refineries could be out for that sort of time. There's a limited extent to which stocks can replace refining production.
The path of Rita really spared most of the damage to refineries that was the concern. There's still a lot of pressure on the market, particularly due to tight capacity.
That area is solid with refining capacity. There's an element of panic in the market but that's not surprising given the lack of capacity worldwide at every level, refineries and oil wells.
These concerns also led to a reduction in speculative long positions in the futures market, resulting in less speculative support for spot prices.
We saw last year just how much oil shot up after Ivan. Crude markets remain delicately balanced and if Katrina causes substantial damage to production facilities, oil prices will exceed $70 and could push toward $80 a barrel.
While we continue to assess the damage from Katrina, the threat to production of new storms is attracting everybody's attention and could drive prices right back up.
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