The Commodities Corner
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Oil: The Gustav Factor
Fri, Aug 29 2008, 10:08 GMT
by Andrei Pehar
Hurricane Gustav is expected to hit the Gulf of Mexico
(which contains roughly 1/5th of all US oil producing and refining
facilities) late Monday or early Tuesday morning, with winds of at least 131
miles per hour.
How will this affect the price of oil?
In many ways, it already has. People have had some time to digest the
news, so the fear factor should already be priced in for the most part.
Even with this development, it could not sustain prices above the 120.43 level
we were watching last week, largely due to the rally in both the Dow and the US
Dollar.
What remains to be seen now is whether the storm hits or misses the facilities,
how many of them, and how severe the damage is. Many are still rebuilding
after Katrina and Rita. Royal Dutch
Shell has already begun the evacuation of non-essential personnel from some of
their platforms in the region.
If these events push price above the new resistance at 119.67, then most likely
we will see a move up to 124.82 (additional resistance is at 128.99 if we clear
the first target). There is strong support at 11.33 and 110.31 – and if the
effect of the storm is not as large as anticipated and we drop below these
levels, then we could see a drop to 104.97, or perhaps 101.79
Published on Fri, Aug 29 2008, 10:23 GMT
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