Oil may take fresh beating this hurricane season

The shale patch won't be picking up any slack if a storm hits the Gulf of Mexico.

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On the heels of the COVID-19 pandemic, hurricane season may give the U.S. oil and gas industry a fresh beating.

Weather forecasters are predicting 2020 could be one of the most dangerous seasons in years, perhaps as damaging as 2005 which included Hurricane Katrina, producing as many as 19 storms.

HURRICANE SEASON 2020 COULD BE INTENSE

For an already vulnerable U.S. energy industry, hit by the coronavirus price crash which has resulted in a historic pullback of domestic production, the stakes are even higher.

Before the coronavirus decimated the shale boom a good chunk of oil and gas production took place on land so the impact of hurricanes was negated if the Gulf of Mexico took a hit.

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Now the Gulf of Mexico will ride out any storm practically solo and without much muscle backup. Energy producers are operating the fewest oil and natural gas drilling rigs on record in the U.S. at  339 on May 12, the lowest level in the Baker Hughes Company's rig count data series dating back to 1987.

OIL CRASHES 305% TO -$36.73 A BARREL

Any storm disruption this year may make us more dependent on foreign oil and gas and could delay any recovery in the oil patch. As it is now, investment in energy has tried up and because oil prices traded below zero for the first time ever last April, before rebounding slightly, investors are staying away from many shale plays.

OIL PRICES ATTEMPT RECOVERY TO $30 PER BARREL LEVEL

The Federal Bank of Dallas recently said that shale patch capital expenditures has fallen around  35 percent during the second quarter of 2020 which was bigger than what we saw during the last oil price crash in 2016 and even bigger than the historic oil bust back in 1986. This type of investment pullback is very troublesome because oil production, due to its nature, cannot be easily reversed.

While not all forecasts about long term weather risks are entirely accurate, our energy market must take heed as the pullback by U.S. energy producers will make the Gulf of Mexico an energy economy hot-spot.

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Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com.