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Oil Markets Ease as Tropical Storm Gordon Makes Landfall

This article was originally published on ETFTrends.com.

Oil markets fell slightly on Wednesday as Tropical Storm Gordon made landfall the evening prior.

The United States Oil Fund (USO) is down over 2% at 4:15 pm Eastern from its peak Tuesday, reflecting easing concerns over potential supply constraints. For context, the ETF was up almost 9% in the second half of August as hurricane season approached.

As CNBC reports, Tropical Storm Gordon-related production shutdowns were only 9% of total production, and the milder-than-expected damage from the storm so far is good news for the 50% of US refining capacity located across the Gulf Coast.

According to James Williams, an energy economist at WTRG Economics, Tropical Storm Gordon shouldn’t impact Gulf oil production or refining dramatically.

“Some production is being shut in and many rigs will be evacuated, but the impact on output should be short-lived if Gordon follows its expected path … unlike Harvey a year ago, Gordon’s impact on refineries should be minimal.”

Despite the easing of supply concerns, there is potential for this storm to cause mild demand-side issues. CNN reports that at least 30,000 people have lost power, and the number could increase as the storm moves further inland.

For investors looking for exposure to the oil market, the VanEck Vectors Oil Refiners ETF (CRAK) contains a basket of oil refining companies and is designed to mirror the performance of the MVIS Global Oil Refiners Index. For a more direct exposure to the commodity itself, the aforementioned USO seeks to track the performance of US-produced West Texas Intermediate oil, while the United States Brent Oil Fund (BNO) seeks to track the performance of foreign-produced Brent oil.

For more news on the oil market, visit our oil category.

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