Oil prices are being pulled in all directions as storms develop in the Atlantic Ocean and U.S. rig counts sputter as Iranian oil sanctions loom. The market found early support as the U.S. rig-count fell by 2 rigs and the fact that the market is finally realizing the impact of cap x cuts that has seen global spare capacity dry up and make the upcoming sanctions on Iranian oil almost impossible to replace. Reuters is reporting that U.S. Energy Secretary Rick Perry is speaking with the energy ministers from Saudi Arabia and Russia, to keep them pumping oil ahead of Iranian sanctions. Perry, along with other analysts, are starting to realize just how tight the oil market is going to be when the Iranian sanctions kick in. 

Then you have all the storms. Storms that could mainly cause demand destruction but uncertain enough that it may cause some production issues as well as transportation issues. There are now three hurricanes in the Atlantic, Florence, Isaac, Helene, as well as a tropical wave over the northwestern Caribbean Sea. This storm should impact Mexico’s oil operations in and around the Gulf of Mexico. The National Hurricane Center says that the storm is forecast to move slowly west-northwestward to the Caribbean Sea and the Yucatan peninsula during the next couple of days with little or no development expected during that time. However, upper-level winds are forecast to become a little more conducive for development when the system moves across the western Gulf of Mexico.

Hurricane Florence is a monster storm and is threatening the Carolinas. Accuweather says that Florence, currently a Category 2 hurricane, is expected to regain major hurricane status (Category 3 or higher) as it continues to track westward and enters a favorable environment for intensification early this week. Florence became the first Category 4 hurricane of the 2018 Atlantic season last week but later weakened due to a zone of strong wind shear and cooler waters.

For oil and natural gas, this storm is bearish because of the risk of demand destruction. Of course, after a major storm hits, that demand could surge back during the rebuilding stage.  Hurricane Isaac could also impact oil operations and refineries. AccuWeather says that Hurricane Isaac will churn westward and bring strong winds and heavy rain to the Lesser Antilles during the second half of the week. Isaac, the fifth hurricane of the 2018 Atlantic season, is located roughly 1,300 miles east of the Lesser Antilles as of early Monday morning. Isaac will continue a westward path toward the islands into midweek. The hurricane is rather compact in size and this may make it susceptible to fluctuations in strength in the coming days. AccuWeather meteorologists cannot rule out the possibility that it could reach Category 2 strength early this week. Hurricane Helene looks like it is going to take a sharp turn west and is expected to strengthen today.