Will Oil Prices Skyrocket in the Aftermath of Hurricane Ida?
“Supply and demand” does not always determine the price trend of crude oil
by Bob Stokes
Updated: September 01, 2021
As you probably know, Hurricane Ida hit Louisiana on August 29, the exact date that Hurricane Katrina made a Louisiana landfall sixteen years earlier.
On August 30, the Wall Street Journal said:
Oil Industry Surveys Damage After Hurricane Ida Slams Louisiana
The storm disrupted fuel supplies, and the speed of the recovery will depend on how long it takes for refineries to come online amid flooding and power outages
Did oil prices skyrocket due to the disruption in oil production? Well, Bloomberg reported (August 30) that prices initially fell 1.6% [as Ida made landfall] before they "edged" higher.
So, no, oil prices did not "skyrocket." As of this writing on August 31, crude oil's price is roughly in the same neighborhood as it was before Hurricane Ida hit.
This is mentioned because many energy market observers might think that a supply disruption would "cause" oil prices to zoom higher. However, contrary to conventional belief, the trend of oil prices is not always determined by "supply and demand."
Indeed, the oil production disruption associated with Hurricane Katrina was far worse than what occurred with Ida.
Even so, take a look at this classic chart from a past Elliott Wave Theorist, which said:
The chart shows the day [Hurricane Katrina made landfall]: August 29, 2005, right at a top and just before a three-month oil-price slide of over 20%. A record-breaking... disruption in the supply of oil failed to make oil prices zoom. On the chart, it even looks as if somehow the event made prices fall.
That doesn't necessarily mean that the price of oil will take the exact same path following Hurricane Ida.
The point is: Financial markets like commodities are not always subject to the economic law of supply and demand, but instead are endogenously regulated and governed by the Wave Principle.
So, what happens with oil's price path now hinges on the current Elliott wave structure of oil's price chart.
Our monthly Global Market Perspective uses the Elliott wave model to forecast energy markets, including crude oil.
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