The US almost entirely dodged the 2026 hurricane season but a late-year storm has formed in the Gulf of Mexico and is headed towards the US coast. Current projections show the landfall of a strong hurricane on Friday night near the border of Mississippi and Alabama. The center looks headed east of most of the Gulf oil infrastructure but the cone of probabililties is still wide.
NOAA identified the strengthening El Niño as the dominant factor behind the weak hurricane season. It’s made the atmosphere hostile to Atlantic hurricanes—even with warm water available to fuel them. That’s because of strong wind shear, more sinking air and greater atmospheric stability. The flip side of that equation is that parts of the US could face other extreme weather. The main downside is greater winter flood risk across the southern US (though this will relieve doubt), alongside less snow and potential water shortages in parts of the north along with a tendency towards drier conditions in the Ohio and Tennessee valleys.
The problem for the market right now is refining rather than oil shipments. The US refineries are running flat out because of extremely wide differentials (cracks) between oil prices and gasoline/diesel. If a storm causes refineries to shut down for any period, it will be further tighten the market at a vulnerable time.
Today, oil prices have come down in a reversal of earlier gains. WTI was last down $1.14 to $88.29 after touching a high of $90.98. Eyes are on Iran talks as usual but there is no real optimism left for a deal before the US midterms. Aftwards, it’s tough to see anything changing unless the oil market tightens materially or Iran’s leadership crumbles. That stretches the timeline for any improvement in energy markets and at the same time, Ukraine and the Hothis are attacking refineries in Russia and Saudi Arabia.
This article was written by Adam Button at investinglive.com.