Lingering impact of Hurricane Ida sets up bullish break higher for crude oil
Tony Sycamore September 13, 2021 5:44 AM
This time last week we covered the Coup in Guinea that has triggered panic buying in aluminium.
Guinea competes with Australia as Chinas largest supplier of bauxite, the world's most common sauce of Aluminium. In 2021 it produced more than 90mt of bauxite, about 25% of the global total and about 50% of Chinese imports. Aluminium closed 7.3% higher last week and is up 48% year to date.
There are signs of a similar near-term imbalance in the crude oil market following the lingering impacts of Hurricane Ida. More than two weeks after the hurricane made landfall, almost half of the crude output in the U.S. Gulf of Mexico has yet to be restarted.
As noted by U.S. Investment bank JP Morgan "Over the past decade of tropical cyclone activity, no storm has left so much Gulf of Mexico crude oil production offline for so long, placing the crude market squarely in unprecedented territory."
Goldman Sachs agrees with JP Morgan's bullish assessment and notes that Hurricane Ida has been unique in having a net bullish impact on U.S. and global oil balances.
On an aggregate basis, Goldman's estimate that Hurricane Ida has caused a decline of 30 million barrels of inventories, more than offsetting the 15 million barrels of sales anticipated from the U.S. Strategic Petroleum Reserve in October.
Crude oil is a market that exhibits a strong seasonal pattern that I have found particularly useful in the past. Generally speaking, the price of oil rallies heading into the Northern Hemisphere summer before peaking in October and retreating into year end.
Whether the same pattern will occur in the final months of 2021 remains to be seen. However, with a seasonal tailwind blowing for another three weeks and a supply shock in place, it would seem a good time to review the chart of crude oil.
As can be viewed on the chart below, crude oil appears to have completed a three-wave corrective pullback from the $76.98 high to the $61.82 low of August. A break and close above recent highs and trend channel resistance at $70.50ish would indicate that a retest and possible break of the July $76.98 high is underway.
Source Tradingview. The figures stated areas of September 13th, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.