Harvey hits US energy sector
Petrol futures soar to two-year highs
US PETROL futures jumped to two-year highs while an already weak dollar hit 16-month lows against a basket of currencies yesterday as tropical storm Harvey pummelled the heart of the US energy sector and raised concerns about the economy.
The dollar index, on the defensive since US Federal Reserve chairperson Janet Yellen failed to mention monetary policy in a closely watched speech at Jackson Hole on Friday, extended its falls as the most powerful storm to hit Texas in more than 50 years was seen as negative for economic growth.
Weakness in the US currency helped the euro to its highest in two and a half years at close to $1.20, building on gains made on Friday after European Central Bank chief Mario Draghi refrained from talking down the strong currency.
Renewed euro strength pushed down European stock markets, with Germany’s bluechip index 0.5 percent lower and France’s CAC 40 slipping by 0.4 percent.
Trade in general was subdued, with the London market closed for a public holiday.
“The strong euro is weighing on European stock markets,” said London Capital Group analyst Ipek Ozkardeskaya. “Tapering talks could further demoralise stock traders in the run-up to the ECB verdict (next month). IT stocks are again on the chopping block.”
US stock futures were also a touch lower, suggesting a softer opening on Wall Street later in the day. Petrol futures soared as much as 6.8 percent as the storm, which came ashore on Friday, continued to batter the state. They were last up 4.5 percent.
The region is home to a quarter of US crude oil refining capacity and some areas are expected to receive a year’s worth of rainfall in a week. Harvey has knocked out a quarter of oil production from the Gulf of Mexico, prompting fears it could overturn years of excess US oil capacity and low prices.
“Although the full impact of the storm’s damage is yet to be determined, the markets expect the impact will be felt globally and affect energy markets for many weeks,” an analyst at FxPro said.
US economic growth more than halved in the quarter after Hurricane Katrina mauled Louisiana in August 2005, but bounced back by early 2006 as reconstruction began and petrol prices moderated.
After surging on Friday, oil prices were mixed yesterday as markets tried to gauge Harvey’s impact on oil production and refinery demand.
Brent futures, the global crude oil benchmark, edged up 0.2 percent to $52.49 (R682.46) a barrel. US crude futures pulled back 0.8 percent to $47.46.
Asian stock markets including Japan’s Nikkei index were little changed, though shares in Japanese property and casualty insurers skidded as investors fretted about the broader impact of the US storm.
In contrast, China’s major stock indexes rose to 20-month highs after a series of strong earnings. Markets mostly dismissed North Korea’s firing of three short-range missiles into the sea on Saturday. – Reuters
Tropical storm has knocked out a quarter of oil production from the Gulf of Mexico.