Hurricane Sally fizzled out without causing the anticipated,
dreadful destruction along the US Gulf Coast. The mood of relief, however, has been dampened by the emergence of the new
threat that is developing into a Category 4 hurricane – Hurricane Teddy.
It may make landfall on Tuesday if the predicted
path by models is correct. If it does not lose its strength in the coming days,
it has the potential to cause havoc when it makes the landfall.
In the light of the development, oil production is
going to be hit on many fronts. Although the logical conclusion is that it may
hit the supply and distribution – causing a hike in crude price in theory – it may
bring the activities to a halt too, as the movement of people and vehicles are
going to be down too in proportion to the impact of the storm.
This is not good news for the oil markets, though.
There were signs of subtle recovery of the oil price this week and the natural
events like this kind may dampen the mood of investors.
In another development, the OPEC does not seem to be
aggressively pursuing an output cut, having learned the bitter lesson of its
ineffectiveness. Saudi Arabia’s desire to cut oil price to Asia sheds some
light on the approach that the cartel will adopt in the coming weeks.
The organisation knows it has to adapt to the
realities on the ground, one of which is the discoveries of oil in the parts of
world, where it was found before.
