Wednesday, September 27, 2017

Crude Oil Update

WTI has  a long history of affinity for Fibonacci retracement levels.

It just touched the .618 retrace of this years move down.

1 yr. chart
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There is also the little issue of seasonality.

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And Hedge Funds have been piling in over the last 3 weeks. John Kemp of Reuters reports they are net long an additional 112 mml bbl wti= Brent on both Nymex and ICE.

So on the downside taking out the Fib .618 retrace of the move up and break out to the upside around 51.15 will help sharpen things up. 

The risk of trading futures and options can be substantial. Trading foreign exchange and energy derivatives carry a high degree of risk, and may not be suitable for all investors. 
The above is merely an abstract theoretical discussion mostly for my own entertainment, not trading advice or a recommendation.

Friday, August 25, 2017

Harvey vs. Ike

In Sept 2008 Ike made landfall in N. Galveston as a Cat 2 with sustained winds of 110 mph, a 950 mbar, and a surge topping the seawall of 17".

Unfortunately the odds of a catastrophic surge, exceeding the damage caused by Ike, occurring in the the Corpus Christi/ Galveston Bay area currently appear to be very high. A 25 ft. surge could float tanks spilling up to 90 mm gal and damage refinery infrastructure not to mention the environmental costs.


 Hurricane Ike came ashore at the point where Galveston Bay connects with the Gulf of Mexico, meaning that the worst of the hurricane storm surge (the “dirty” side of the storm) affected the less developed areas east of Galveston Bay. Nonetheless, although the peak surge was only 12 to 14 feet above mean sea level in Galveston Bay (compared to east of Galveston Bay, where a surge as high as 17 feet occurred) For the most part, the industrial complex on the west side of Galveston Bay escaped serious damage due to the location of Ike’s landfall; most of the surge came ashore east of the bay. If the storm’s winds had been about 15 percent larger, with landfall further to the south (as the original forecast projected), it is estimated that the resulting storm surge would have reached 25 feet or higher in the Houston Ship Channel (about 12 feet higher than the actual surge during Hurricane Ike).

Figure 2: Hurricane Ike +15 percent wind speed, landfall at San Luis Pass with modeled water levels

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It is difficult to imagine or overstate the extent of the economic loss and environmental damage associated with the storm as depicted in Figure 2. The area in the middle of the graphic illustrates lower flood levels within the Texas City hurricane levee system, which, along with the Galveston seawall, would have been overtopped by Ike and an additional 15 percent wind speed had the storm made landfall at that location. The storm depicted in Figure 1 generated over $25 billion in damage with a surge of 12 to 14 feet. With a 25-foot surge, more than 2,000 oil and chemical storage tanks along the Houston Ship Channel would be inundated, and water would flood much of the production areas in most refineries and chemical plants. Some areas would be more than 10 feet under water. Work completed for the SSPEED Center indicates that a 22-foot surge would cause a spill of approximately 59 million gallons of crude oil and other chemical substances, and a 24-foot surge would cause approximately 90 million gallons of these substances to be emptied into adjacent neighborhoods and Galveston Bay (SSPEED Center, HGAPS report, 66). 

The damage caused by such an event would be devastating and could easily become the worst environmental disaster in U.S. history. The crude oil and hazardous substances stored on the Houston Ship Channel would be released into the Galveston Bay system, one of the country’s most productive fish and shellfish nurseries. Many of the flooded chemical plants and refineries would require extensive repairs to compressors, pumps, flanges, and other exposed equipment, and there would be vast damage to pipes and process units. A relatively shallow flood during Hurricane Ike shut down the Invista facility in Orange, Texas, for approximately three months, for example. The economic damage to the industrial complex from a 24-foot surge has been estimated by SSPEED Center to range from $37 billion to $73 billion, estimates that do not include damage to the natural resources in Galveston Bay (SSPEED Center, HGAPS report, 69).

Harvey forecast track;

And finally;