Oil Mixed As U.S. Oil Industry Avoids Serious Damage From Hurricane Laura

Oil Video 28.08.20.

Hurricane Laura Did Not Cause Significant Damage To Platforms Or Refineries

Hurricane Laura was the main catalyst for WTI oil during this week. Laura made landfall as a Category 4 storm but has since lost power and turned into a tropical depression.

While the hurricane left a path of destruction, early reports show that it did not cause major damage to oil platforms or refineries. This is bearish news for the oil market as oil prices have been supported by the hurricane threat.

The U.S. oil industry has an extensive experience with hurricane-related production shut downs so the previous production levels will be restored quickly. When Laura was recognized as a serious threat, more than 1.5 million barrels per day (bpd) of oil production was shut down. Now that the storm has passed, this oil will return to the market.

This week, EIA reported that U.S. domestic oil production increased from 10.7 million bpd to 10.8 million bpd. The next week’s report will surely show a decline in production  levels and a decline in inventory levels, but the market will likely focus on future supply/demand balance.

The U.S. Dollar Weakness May Provide Additional Support To Oil Prices

Yesterday, the U.S. dollar was trying to gain more ground against a broad basket of currencies after Fed’s decision to adopt an average inflation target of 2%. This strength put pressure on oil prices which failed to settle above the nearest resistance level at $43.50.

Today, the prospect of having rock-bottom interest rates for years put pressure on the U.S. dollar, and the U.S. Dollar Index is trading near yearly lows.

The U.S. dollar weakness is a bullish catalyst for dollar-denominated commodities as it makes them more affordable for buyers who have other currencies.

In case the U.S. Dollar Index manages to settle below the yearly lows near 92.10, it will likely gain additional downside momentum, providing more support to oil.

In this scenario, oil will have better chances to get above the nearest resistance level at $43.50 and continue the current upside trend.

For a look at all of today’s economic events, check out our economic calendar.