Oil in the Eye of the Hurricane
The winds of Hurricane Laura continue to strengthen as it crosses the warm waters of the gulf of Mexico and along with it, oil is strengthening. That led to the highest close in WTI on Tuesday since the pandemic and also left Brent just shy of the 200-dma. Laura is gaining in strength and appraoching to be a "catastrophic" Category 4 storm. More than half a million people were ordered to evacuate in Texas and Louisiana.
Most offshore production is shut down and the storm is headed right for the heart of US refining country in Beaumont, Texas.
The problem for oil bulls is that a storm does nothing to change the overall fundamental picture. There's still 10m barrels of spare OPEC capacity and the latest mobility numbers in Europe are turning lower as the pandemic picks up.
With that, it's dangerous to see a short-term storm-inspired breakout as a the underpinning of a larger rally. At the same time, commodities everywhere have been strong as the US dollar slides and economies recover.
At times, the Canadian dollar has acted as a good leading indicator for oil and it's back to pre-pandemic levels. This is already the most-hated rally in history, why not add an oil chapter?
In terms of the broader risk trade, a big miss in August US consumer confidence did nothing to dent market confidence, especially ahead of Powell's speech on Thursday due 9:10 Eastern time (14:10 London, 17:10 Dubai).
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