How Sandy aftermath can fuel a Crude Oil rally

Last Updated : 01 November 2012 at 12:30 IST

Sandy came, Sandy saw and Sandy destructed.

And refineries across the North East Coast in US was shut down. With these refineries shut, crude oil inventories ruled high, invariably bringing in pressure on prices.

Now the refineries have started functioning. This means inventories of crude oil too shall be depressed in the coming days. Still, the crude oil prices are ruling low. Why? Sandy not only destructed the infrastructure in US but also demand for crude oil. As infrastructure facilities like roads and bridges are devastated, no vehicles would run other than two-wheelers. This should take the steam off the crude oil prices, analysts say.

But the truth just begins here.

Sandy may have wreaked havoc and destroyed demand. But it can also create demand. Once the reconstruction efforts gain momentum, power demand would start looking up and what better way to garner power other than running diesel power generators round the clock.

The power-supply infrastructure in cities devastated by Sandy may take weeks to get restored if not months. Until then diesel generators would run the show.

And when reconstruction gets into full throttle mode, that would only enhance fuel demand as hoards of people and loads of steel and bricks and mortar and what-not will have to be transported.

So think twice before going short on crude oil: we have a rally to catch!

As published in: http://www.commodityonline.com/news/how-sandy-aftermath-can-fuel-a-crude-oil-rally-51140-3-51141.html

Will Sandy give back what Great Recession snatched away from us?

Last Updated : 01 November 2012 at 10:40 IST
The Americans are taking a heave of sigh after Sandy, the Frankenstorm lashed through the area leaving behind death and destruction. The estimated losses vary from $15 billion to $45 billion. While it may take time to rebuild and restore the infrastructure there to its original glory, a few set of positives emerge.

The restoration of lives and livelihoods is a painful task; but the Americans can spend their way out of the current economic crisis and could even think of being thankful to Sandy for all that she has done, if they are willing.

The Americans have been QE freaks. Ben Bernanke has now spend many a billion dollars to perk the economy up by injecting innumerable greenback into the system. But ultimately this money was invested by banks in commodities and equities who were supposed to lend them in the first place to industry and economy. This is because of a heightened sense of risk aversion as exhibited by the banks.

Hurricane Sandy has changed all that and more. Infrastructure restoration would be the primary priority of Obama administration as just like any other political leader, he loves to sit in his cushion chair in the Oval Office, especially as he has already cast his vote and requesting his fellow Americans to follow suite.

"Do not figure out why we can't do something. I want you to figure out how we do something," Obama exhorted to his legion of officials as and when he assessed the situatiion. "I want you to cut through red tape, I want you to cut through bureaucracy, there is no excuse for inaction at this point. I want every agency to lean forward." he added.

Once this vision is implemented, banks too will have to lend the money to facilitate reconstruction efforts; and right money (which is government backed) in right hands (people eager to pick up their lives where they left it) at right time (a time of death and destruction) can work wonders.

Spending for reconstruction would no doubt would help the economies there to gain momentum and restore some of the lost jobs. Post World War growth experienced by the world was no magic and all reconstruction feats.

There is a psychological factor attached to this as well. Once the economies get back to their feet and that too from depressive moods would double the sense of well being and hope.

What the Great Recession had snatched away from US could be delivered at least in part or if that be not the case could at least trigger a new wave of optimism and hope. And when the world's largest economy finds its dancing tune, that is a case for revival for the entire planet.

Sandy will spark a micro-trend. Let that be a trigger for other macro trends underpinned by hope and optimism. 

As published in: http://www.commodityonline.com/news/will-sandy-give-back-what-great-recession-snatched-away-from-us-51135-3-51136.html