Energy Markets Are On Storm Watch This Morning As Most Of The Industry Takes The Day Off

Energy markets are on storm watch this morning as most of the industry takes the day off, and financial markets digest a weaker Jobs report and the worst defeat by British conservatives in 248 years.

Refined products were trading a penny lower Friday, despite a shift north and east in Beryl’s projected path that puts a strike on the country’s busiest energy port (Corpus Christi….not Houston) in play while some models also have the storm hugging the Texas coast as it moves north and east which would put many more refineries and oil rigs in the storm’s path and no matter the damage it does or doesn’t do, it’s certainly going to disrupt import and export traffic over the coming week. Most refined product traders have the day off today since cash markets aren’t being assessed, but don’t be surprised if futures turn around later in the morning as this new risk reality sets in, particularly given how much flooding parts of the state have already seen this year even before dealing with a tropical storm.

With the unfavorable shift in the storm’s path for oil producers and refiners, expect a quick move to evacuate non-essential personnel from Gulf of Mexico oil rigs starting today, and we’ll likely see at least the 3 Corpus Christi area refineries pull back on their run rates over the weekend to avoid the extra damage that can occur if they’re knocked offline while running full out. Models now seem to be agreeing that wherever the storm finally makes landfall, it will move inland starting Monday and dump heavy rains across Texas for potentially two full days before heading north and east to dump rain on the population centers in the North Eastern US late next week. At this point the storm is predicted to be a category 1 hurricane at landfall, but don’t be surprised if that scale increases over the weekend.

The June payrolls report estimated 206,000 jobs added in June, while prior month estimates were slashed by 111,000 jobs, suggesting the labor market isn’t quite as strong as previously thought. Political conspiracy theorists will also note the statistical impossibility of the BLS revising 24 of the past 25 estimates lower. The official unemployment rate ticked up to 4.1% while the less manipulated U-6 unemployment rate held steady at 7.4%.

Markets largely shrugged off a huge 12-million-barrel decline in crude oil inventories Wednesday as the DOE continues to struggle with its accounting methods, showing a huge decrease in its oil adjustment factor on the week. Refiners cranked up run rates across all 5 PADDs last week, taking advantage of the pre-holiday surge in demand and shrugging off weaker margins. Between the storm in the Gulf Coast and the heat wave targeting California, it’s likely that we’ll see run rates cut back in the July 17 report, as next week’s data is compiled based on data reported today before those impacts are felt.

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