SINGAPORE, Oct 29 (Reuters) – U.S. crude futures slipped below $86 a barrel on Monday as refineries along the East Coast lowered run rates ahead of approaching Hurricane Sandy, reducing crude use in the world's largest oil consumer.
Well no worries, for next time you just have to keep in mind the geographical impact of any storm/outage
- if it's offshore gulf it's going to disrupt imports and production (tightening supply, bullish for prices).
-if it's on-shore gulf it's going to be more mixed because it'll also shut the U.S's largest refinery complex (reducing demand, but still disrupting imports/pipeline flows, so bullish or bearish depending on external factors)
- if it's in the Midwest, probably bearish since it'll shutdown refineries and there's already a glut of oil in the region so supply concerns won't come into play (bearish)
- if it's in the west coast, the impact will be very muted since the region is fairly disconnected from the rest of the markets given oil from the Alaskan national reserve (neutral).
- if it's on the east coast - bearish since it shuts down refineries and destroys demand. (bearish)
So in the past when you've heard about storms pushing prices higher, it's usually because they take place in the storm heavy off-shore gulf region. Also keep in mind these are general trends for crude, refinery disruptions are bullish for products, but that's a topic for another day...