Ike: Energy Hike?


Shell , Andarko and other energy companies are delaying the restart of offshore oil and natural gas production from the Gulf of Mexico in the wake of Hurricane Gustav and preparing for another round of evacuations as a second giant storm threatens to batter the region.

“We dodged the bullet with Gustav but another big storm is coming and it's going to test the infrastructure once again,” explains Tradition Energy’s Addision Armstrong. “We’re not out of the woods by any stretch of the imagination.”

The one-two punch from Gustav and Hurricane Ike will likely carve deeply into U.S. energy inventories in the coming weeks, potentially raising fuel prices, as the source of a quarter of domestic crude and 15 percent of the United States' natural gas lies dormant for a fresh blow of high winds and waves.

“With Ike coming in, crews aren’t getting back onto the rigs as planned. And now it’s starting to look like we’re not going to get enough nat gas into storage in time for the winter,” Armstrong adds.

On the oil front, shutdowns triggered by Gustav have cut nearly 11 million barrels of cumulative U.S. crude output so far, the equivalent of about half of what Americans consume in a day, according to data from the Minerals Management Service.

How do you trade?

“My bias is to the upside in oil,” says Armstrong, however oil is being dominated by the dollar. I think you can get long crude as long as you keep your eye on what’s going on in currencies.

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