Fay can't decide where she wants to go now that she has arrived in Florida. After crossing the Florida Keys and turning east to cross Florida to the Atlantic her track is going to abruptly change back to the west with a 25% chance of returning to the gulf and the oil patch.
I have never seen a hurricane cross Florida from the gulf to the Atlantic and then return to the gulf but I guess it is possible if the jet stream is favorable. The abrupt change in expectations for direction has rigs in the gulf on high alert. If she does reverse course we should know by Wednesday evening.
The direction change for Fay was credited for oil prices rallying to $115.76 intraday after trading around $112 most of the night. The rally was blamed on a lot of things but I didn't hear anybody mention the expiring futures. The electronic contract expired at the close on Tuesday and Wednesday is the last day of trading on the big contract. I suspect the rebound was short covering ahead of expiration after support at $112 failed to crack.
The MasterCard spending pulse report showed a 17th consecutive week of declines in gasoline demand. The average price of gasoline dropped to $3.74. Believe it or not the buying interest for SUVs has picked up sharply over the last two weeks. Once the price of gasoline started back down the urge to get a bargain on an SUV was too much to bear. Fortunately dealers have plenty of inventory and plenty of incentives to unload them. Days of supply for gas-guzzlers are at decade highs while economical cars are moving briskly.
Venezuela plans to offer OPEC a proposal for cutting production at the September 9th OPEC meeting. "We see a worrying trend toward lower oil prices. If that continues, our reduction proposal is what we will take to Vienna in September," Oil Minister Rafael Ramirez told reporters at a press briefing. "We firmly believe the price should stay at a level close to $100/barrel" for the WTI benchmarking crude, he added. Ramirez said intensified speculation in futures' contracts trading is to be blamed for the recent price spike, and that, "the abrupt fall that there has been in the price, of more than $20/b, is the demonstration that there was tremendous speculative activity. The world energy market is subject to the direct action of speculators."
In spite of that, said Ramirez, who is also president of Venezuela's state oil company PDVSA, producers will not let a freefall in prices occur. "I have said in the past that there was no need of varying production towards an increase. In any event, if we (OPEC) see a trend towards lower and lower prices then we will have to consider a reduction in output
and that is the proposal we are taking."