JUDGMENT OF RECORD ·
Isaias was a small storm that exposed a thin buffer. With the reserve at 283M barrels, minor US supply outages now carry outsized price risk.
On Oct 9 Hurricane Isaias came ashore near Destin, Florida, as a Category 2. Before landfall the Marine Minerals Administration put 71.5% of Gulf oil output shut in. Earth Science Associates cut its estimate of lost output to 7.23 million barrels, from 11.17 million two days earlier. The storm was expected to miss the largest refining hubs.
On Oct 10 DOE still lent up to 4 million barrels from the Strategic Petroleum Reserve, 2 million each to ExxonMobil and BP, to keep refineries supplied. EIA data put the reserve at 283.0 million barrels on Oct 2, which one trade outlet calls the lowest since 1982. EIA's Oct 6 outlook assumes 4.5 million b/d of Middle East output stays shut in through Q4, with Brent near $105.
The layer moving is infrastructure: the buffer, not the supply. A storm worth less than two days of the Middle East shut-in still needed a federal loan. So small US outages now move prices more than their size. No signal flips. Confidence is Medium: the loss figure is one firm's model, and post-storm restart data are not yet out.
- CONFIDENCE
- Medium
- HORIZON
- Through Nov 30
- VS. PRIOR CALL
- New call
WHAT WOULD PROVE THIS WRONG
Gulf oil output returns above 90% of normal by Oct 19, and EIA's Gulf Coast diesel price falls by Oct 26 with no further SPR loans. That would show small outages are not carrying outsized price risk.