Overview As Gordon made landfall, Hurricane Florence was busy crossing the Atlantic, attaining a peak strength of Category 4 but slowing to a Cat 1 before striking the coast on September 14. Although Florence didn’t bring extraordinary winds, it did bring prolonged heavy rains to the East Coast. Florence made landfall between North Carolina and South Carolina, where it stalled and dumped over 30 inches of rain before moving inland and north. High waters cut off many roads along the Carolina coasts, an area not used to extreme flooding. Although Florence did not impact any national fueling infrastructure, the local impact on supplies was severe. The Carolinas remained on Code Red for a week after the hurricane passed as inland flooding slowly made its way through the state’s tributaries back towards the Atlantic. Remnants from Florence made a second-pass towards the Carolinas days later, and although they ultimately proved uneventful they kept fuel suppliers on alert until September 28, when Mansfield declared all-clear in the Carolinas.
Hurricane Season
Although this year’s hurricane season was less destructive than last year, there was plenty of storm activity to keep fuel procurement teams on their toes. The first several storms of the season came and went without significant incident. The first FUELSNews alert was for Tropical Storm Gordon, which made landfall on September 4 near the Mississippi-Alabama border and brought some 4 inches of rain.
With the worst behind them, markets continued with business as usual until Hurricane Michael entered the national stage in mid-October. Michael intensified rapidly and slammed into the Florida Panhandle just shy of a Category 5 storm, the strongest storm ever to hit the Panhandle. Unlike Florence, Michael travelled through the Gulf of Mexico, briefly shutting down over 700 kbpd of offshore oil production. Although an extremely powerful storm, Michael was also extremely quick, limiting the devastation along the coast. Supplies quickly normalized after the storm, and elevated pre-storm demand cooled quickly. •
Octo-Bear Surprise
October opened at the highest point of the year, with WTI prices hitting a 4-year high of $76/bbl. With prices trending upward throughout 2018, markets expected the trend to continue unabated until prices reached $80 or higher. In fact, a FUELSNews poll in early October asking readers whether crude would hit $100 or $50 first showed 63% expected prices to continue rising to $100. Diesel prices reached $2.40 during this time, while gasoline traded for $2.10 per gallon. But October had other plans for oil prices. After hitting $76, WTI crude immediately gave up $2/bbl in one day. On October 11, the stock market took a significant turn for the worse – an ominous signal given how many market plunges have begun during or near October (1929, 1987 and 2008 to name a few). That stock market drop rippled through financial markets, causing a turnaround for crude that would last through December. By mid-October, the bearish market became quite evident. Net long positions, the difference between bullish and bearish bets in the market, reached an annual low on October 19, and continued falling in the weeks thereafter. Fanning the flames of the sell-off, Saudi Arabia and Iraq both reported increased production in October, causing OPEC production to rise overall despite production slowdowns in Iran and Venezuela. • 8
© 2018 Mansfield Energy Corp
