Want to know how bad the August payrolls report was? Bad enough to frighten energy traders into dumping oil futures when there's a major storm brewing in the Gulf of Mexico. That's how bad. The National Hurricane Center has just issued a tropical storm warning for Louisiana and Mississippi, predicting what is now officially Tropical Storm Lee will gather strength over the next 48 hours, with hurricane-force winds possible over the weekend.
On its current course, Lee is expected to roll through some of the nation's richest offshore oil and gas fields before drenching New Orleans with up to 20 inches of rain.
Now, Lee is not likely to produce the same screaming winds and huge storm surge as Katrina five years ago, but New Orleans is already on full alert. So is the offshore energy industry.
The Louisiana Offshore Oil Port, the nation's only deepwater oil terminal and overseas crude's gateway to the Gulf Coast's many refineries, is shut. And offshore rig owners are already pulling crews ashore as a precaution ahead of the storm.
Under normal circumstances, especially going into a three-day weekend, energy traders would be frantic over possible supply disruptions, bidding crude futures through the roof. Who in their right mind would risk getting caught short when storm flags are flying all along the Gulf Coast?
The short answer: Anyone taking a hard look at the economy.
The Labor Department's payroll numbers were so bleak - no measurable U.S. job growth last month - that they simply drowned out concerns over the tempest brewing in the Gulf.
Heading into the close, the New York Mercantile Exchange's October crude-oil futures contract fell $2.48, or 2.8%, to $86.45 a barrel. The October natural gas contract dropped even more, down 4.4% to end the day at $3.87 per million British thermal units.
While the storm is undoubtedly cushioning the blow, the dismal state of the economy, tepid energy demand, and poor prospects for improvement any time soon simply has sucked the oxygen out of the Nymex trading floor Friday, leaving traders paralyzed in the face of what would otherwise have been a perfect excuse to pump up energy prices.
That's a very rare and powerful reversal. |
