The Gasoline ETF (UGA) increased from 53 to 56 in the last few days. If storms keep coming and follow these general tracks, the effects on production seem likely to drive low inventories towards shortages. Market awareness of the risks will grow in the next week.
Gasoline inventories, as reported in the TWIP, are near their 5 year inventory lows. The blue nipple is the supply shock that hit the US Southeast in Sept 2008 (July 2008 forecast of that risk).
The size and shape of that nipple indicates that once an outage begins, driver behaviors shift from mostly empty tanks to mostly full tanks. This pulls 15 to 60 million barrels out of inventory.
Tropical storms Ernesto and Florence are following paths that looks likely to affect Mexican and/or US oil production and refining.
With an oil demand for 19 million barrels per day (mb/d), a storm lasting several days, several storms in a row or a storm that does some damage can take 30 million barrels out of the supply. At some level near 195 million barrels of supply drivers panic as minor gasoline outages cascade into a month or two of gas lines.
In 2008 this occurred at the end of the hurricane season. With the current storms consistently following the same track and much earlier in the season, the risk of significant and persistent outages increases.