Hurricane Teddy: new threat to oil supply and distribution in the Atlantic

 

hurricane teddy

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.

 

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