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US Oil & Gas Face Serious Turbulence

The US continues to be the focal point for many in the commodities market. The nation’s southern states continue to be lashed by extreme weather.

Just two weeks after Harvey tore through the Gulf of Mexico, Irma has hit the Caribbean. The category 4 storm is barrelling towards Florida, with several small islands also in the firing line. The storm is expected to make landfall in the US sometime over the weekend.

Gas and Oil Futures

The biggest losers on the market were gas and oil futures.

Bloomberg has reported gas futures for October dipped 9.8 US cents — or 3.2% — to US$2.972 earlier this week. Prices on the New York Mercantile Exchange (NYME) currently sit at US$2.981 — up slightly from the earlier low.

Analysts are firmly blaming the weather for the result. John Kilduff, a founding partner of Again Capital remarked:

Now you have no direct impact on Gulf of Mexico production and you have a large swath of Florida offline potentially…

Add the demand loss from cooler temperatures in the eastern US and it’s kind of like a trifecta…

It’s certainly not helping an already embattled gas market. Harvey killed off a lot of demand and global supply is still very much in a glut. It could mean the surplus is set to continue for the foreseeable future.

Meanwhile, oil futures have been mixed overnight in US trading. Brent reached a five and a half month high, settling at US$54.49 a barrel — a modest 0.5% gain. Crude oil on the other hand dropped marginally to US$49.09 a barrel — a very tiny 0.1% slide.

Reuters notes:

…the EIA (The US Energy Information Administration) said US oil refinery utilization rates slumped 16.9 percentage points to 79.7 percent last week, the lowest rate since 2010.

Recovery could be up for a setback as well. Another storm, Jose, is trailing Irma and is set to hit hurricane status sometime tomorrow. Meanwhile in the Gulf of Mexico, another hurricane — Katia — could pose another threat.

America’s wild weather just won’t relent it seems.

In other commodity markets, news and prices were also mixed across the board.

Nickel — $15,117 per tonne:  -0.1%
Iron Ore — $75.61 per tonne:  -1.6%
Gold — US$1,348 per ounce:  -0.6%

Nickel’s high price supported, for now

Steel demand and lower nickel production are the key factors driving up the nickel price recently. And while it has pared back slightly overnight, it’s still trading at a premium. Though some are questioning how long it can maintain current levels.

Analysts at Business Monitor International (BMI) research are predicting a fall over the next 3–6 months. They believe China will ease back on demand for the metal.

Iron ore won’t settle

Iron ore continues its late week downward trend. Falling 2% on Wednesday, it has backed up loses with a further drop overnight.

Commonwealth Bank commodities analyst, Vivek Dhar, notes that steel prices in China are slumping. The Middle Kingdom is lifting its stockpile, putting pressure on iron ore prices.

Gold lowers slightly, but up 2.45% past week

Global unease continues to be a boon for gold bugs and could continue to rally. Some analysts believe gold could climb as high as US$1,400 an ounce.

Though this is a very optimistic target. Everything will be riding on the US dollar. If it rebounds expect, gold to ease back.

But, if you’re sceptical about the US economy’s long term prospects, then you need to protect yourself. Make no mistake, if the US crumbles, Australia will follow.

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