Crude oil prices fell sharply this week amid ongoing concerns about a glut of U.S. crude oil that could get worse if refineries are affected by tropical storm Nate. The storm is projected to travel northward through the Gulf of Mexico and to hit Louisiana, potentially crossing paths with dozens of refineries.
While Nate is expected to be far smaller than Hurricane Harvey, Harvey’s drastic impact on the petroleum industry loom large. Markets fear that refinery shutdowns could lead to a decreased demand for crude oil, while limiting supplies of refined gasoline and diesel fuel. So far, oil prices have responded with a sharp plunge lower, dragging fuel prices moderately lower by a few cents per gallon this week.
U.S. shale oil drillers have been expanding production, making the supply problem even worse.
Since domestic demand cannot keep up with supplies of oil, producers have turned to selling the black gold abroad. This move has led to record-breaking exports of petroleum; the U.S. now sells nearly 2 million barrels of crude oil per day to foreign countries.
As of midday Friday, November crude oil futures traded for $49 per barrel, the lowest price in almost a month.
Harvest progresses slowly
Corn and soybean harvest is in full swing, but most farmers are behind schedule compared to usual. As of last Sunday, only 17 percent of the corn crop had been harvested, compared to a five-year average of 26 percent. Soybeans are on the slow side as well, with only 22 percent out of the field, compared with 26 percent normally. Despite the slower pace, the outlook for the crops is growing more optimistic, as the USDA continues to show better crop conditions.
Typically, as farmers sell their recently harvested grain, they depress prices, making mid-October prices near the lowest of the year. To avoid the seasonal low, many producers invest in on-farm storage, like silos or large storage bags that can stretch longer than a football field. They then depend on the futures and options markets to help manage financial risk rather than selling at harvest.
Investors, on the other hand, often buy corn and soybeans at harvest time, attempting to catch a harvest bottom in prices.
As of midday Friday, November soybean futures traded for $9.70 per bushel, while December corn was worth $3.50.