Climate risks strongly affect oil markets
Date
7/18/2024 7:35:36 AM
(MENAFN) Climate risks, including wildfires, hurricanes, and natural disasters, are progressively influential factors shaping oil market dynamics as global efforts to transition away from fossil fuels face ongoing challenges. Recent events like Hurricane Beryl have underscored these concerns, triggering market anxieties and driving up crude oil prices as the storm approached Texas in early July.
Texas, a key hub in the US oil industry, accounted for 42 percent of the nation's crude oil production in 2022 and hosts a significant portion of its refining capacity. The concentration of refineries along the Gulf Coast, where about half of the US refining capacity resides, amplifies market fears of supply disruptions during extreme weather events like hurricanes.
Han Tan, an analyst at Exinity, highlighted how the proximity of refining infrastructure to hurricane-prone areas heightens market volatility, as investors react to potential disruptions in oil supply. The anticipation of a potentially storm-heavy season following Hurricane Beryl's early and intense formation has further fueled concerns among market participants.
The World Meteorological Organization's warnings about the unusual timing and rapid intensification of Hurricane Beryl underscore broader climate trends. Such events not only threaten immediate disruptions but also signal a potentially more turbulent future for weather patterns, influencing long-term market strategies and pricing dynamics.
Earlier in the year, wildfires in Canada's oil-producing regions, such as those near Fort McMurray in May, similarly impacted oil prices. These incidents serve as stark reminders of how climate change-induced events can disrupt oil production and supply chains, prompting significant price fluctuations in global markets.
Jorge Leon, an analyst at Rystad Energy, emphasized that climate change has emerged as a critical risk factor for oil markets. He anticipates these risks to intensify in the coming years, manifesting in more frequent and severe weather events that could increasingly impact oil production, refining operations, and market stability on a global scale.
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