Turbulent Storm Yet Crude Calm


All eyes are on Gustav as the severe storm bears down on the Gulf of Mexico. Despite the threat of flooding and wind damage crude oil closed little changed on Friday.

For the second day in a row traders are almost speechless to see that a severe storm isn’t pushing crude higher. What’s going on?

“It tells me that there’s some sort of equilibrium here and some sort of elasticity of demand,” says Zach Karabell on CNBC’s “Closing Bell. “Remember we saw a lot of demand destruction in the United States for gasoline.”

In other words, people are driving less and that matters much more than a finite event such as a hurricane. Unless it does severe damage, which typically is not the case, "it doesn’t change the long term demand curve for oil," Karabell says, which looks bearish.

On Thursday we posed a similar question to Addison Armstrong of Tradition Energy. He told us “This storm is fairly priced into the market. “And there are a lot of competing theories to how this thing is going to play out,” which adds to the uncertainty.

Meanwhile, if you're looking for a trade, you won't find one from Joe Terranova. He recommends sitting out the storm. "This is too fast of a trade for most investors,” he said. “No one other than a professional trader who’s sitting in front of a screen is fast enough for this trade.”

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