September storm's impact
Florida has suffered damages from Hurricane Irma approaching from the Atlantic Ocean.
It is said to be the strongest storm in last 100 years.
Local authority estimated that the damages would total to US$200 billion, following the preceding impact of Hurricane Harvey.
To ensure optimum safety, Florida Government has ordered the shutdown of two nuclear plants before the storm.
As the storm spreads its destruction to US’ territory, oil prices have been lifted from shortage of output.
Since Hurricane Harvey, supply has been reduced due to a technical halt in operations.
Following Hurricane Irma, many crude basins have been flooded and its production halted.
Nevertheless, crude prices have seen a rise in demand.
In addition, OPEC and Russia have reported the largest production cut in August by daily volume of 79,100 barrels per day.
This is the best effort in making a cut in output since March and this might continue to push the crude prices higher in the coming months. The weakening dollar will be another catalyst in lifting crude prices and general commodities.
Amid wide expectations US President Donald Trump’s administration revealing the long-awaited tax-reform package, the Secretary of Finance Mnuchin announced reform details which could be made known by December and back-dated since January.
Positive sentiments have sent the new driving forces into Dow Jones market by matching previous historical high at 22,118 level.
It would be essential to watch the FOMC decision on September 20. Federal Reserve policymakers led by chair Janet Yellen are hesitant in implementing the rate hike due to low inflation and a delay in tax-reform.
If they act on implementing higher rates, commodity prices will falter further with Dow Jones benchmark.
However, staying intact would depend on the trend in crude prices in order to determine the inflation level of recovery for the economy.
In September, there will be many fundamental influences that will trigger the volatility of market trends.
However, the successful taxreform, if announced earlier by Trump’s administration will excel all other negativity and summon a new buying interest in equity and commodities.
Keep watch of a possible doubleedge effect of the hurricane impact on US until the end of this month.
Observe the dollar trend that will trigger an inverse direction in the euro currency in conjunction with a potential tapering in the upcoming eurozone stimulus.
In case of a recovery above US$50 per barrel again, crude prices may advance higher this time to US$55 per barrel in lieu of a lower dollar value.
DAR Wong is a registered Fund Manager with 28 years of experiences in Singapore. The expressions are solely at his own. He can be reached at dar@pwforex.com.