El Niño and improved infrastructure may reduce Oil prices further

It’s an ill wind that blows no good – goes the old wives tale. Well in the case of El Niño it seems that this, combined with structural improvements in Oil refining and storage may prove a bonus winter for the worlds largest consumer country.

Oil prices fell to a six-month low on Friday on expectations that the USA has built up capacity for enough fuel to see it through the Winter and more than meet capacity needs if any unexpected surges in demand or disruptions to supplies occur.

On the London Oil futures market November ICE Brent fell another Dollar to $62.54 a barrel – a four percent drop on the week. In New York the price of October West Texas Intermediate fell six percent on the week to $62.37.

Analysts are mixed about whether the decrease is a reflection of improvements in storage and infrastructure in the USA, or a seasonal halt in anticipation of the winter season.

The emergence of El Niño in the tropical Pacific may also have had a moderating effect on the hurricane season this year, which has been significantly milder than predicted by meteorologists -though effects next year could be worse.

Last August the USA suffered one of its worst ever hurricanes when Katrina ploughed through the Gulf Coast causing infrastructural damage to many refining facilities – much has now recovered.

The presence of El Niño usually indicates a milder winter in the northern US states. So the call on fuel stores may be less than usual. Of course, predicting the weather makes predicting the stock market look easy, so things can change.

Members of OPEC have indicated they would possibly reduce supplies if prices fall below $60 and are likely to debate this at the next meeting again in December.

Many analysts are predicting that prices could indeed fall below the $60 marker in the next few weeks – US supplies being sufficient to support the fall without any rush to buy at those prices. The next few weeks will test the confidence of the US in its current infrastructural capacity as the prices drop to tempting lows.

Across the board commodities seem to have been unfashionable this week with Gold, Copper, Zinc and Nickel declining as well. At $7,210 a tonne Copper was at a three month low.