Storms, Oil, and Markets: A Week of Wild Weather and Economic Whirlwinds
Last week in the Gulf Coast, it was raining cats and dogs….. but fortunately nobody ate them. It could have been much worse, but the damage from Category 2 Hurricane Francine was not too severe despite the 6 – 9 inches of rain. A notable event was that a huge oak tree in Watson, Louisiana split apart and toppled during last week’s storm. The Livingston Parish Sheriff’s Office says the tree had lived for over 230 years. There were some temporary disruptions among several refineries and gulf coast offshore platforms but there were no reports of significant long term damage otherwise.
The storm was yet another in a seemingly series of short-term bullish blips to oil prices, that prop up the spot price. The saber rattling rears its ugly head, spot prices bump up and then recede like the waves on the ocean along Asbury Park. There is a prevailing bearish headwind wafting through the air associated with demand destruction, deflation in China, softening of the US labor market and the feeling that there just is a lot of untapped supply of oil out there. To that end, OPEC+ agreed to extend voluntary production cuts to the end of the November instead of at the end of September, since the cartel had previously planned to gradually lift output starting Oct. 1. So range bound we’ll be for a little while, as this short term vs. long term tug of war continues. Trick or treat.
The equity markets couldn’t sit still and let the oil boys have all of the fun. The S&P 500 bounced from its worst week of the year to post its best week of the year. It was also the first time since June 2022 that the market index fell at least 4% in one week and then rallied more than 4% the next. First the softening labor market made people stroke their collective chins, then the inflation data threw the engines in reverse as the iceberg approached. The rate cut is indeed coming. The Dow hit an all time high yesterday. And just when everyone thought the Cowboys were headed to the Super Bowl, the Saints took them to the woodshed. Oh this news that make our heads spin.
