What does Hurricane Sandy Mean For The Oil Markets?

The NYSE Euronext was shut for two consecutive days due to adverse weather conditions for the first time since 1888. The Exchanges are only planning to reopen on October 31st. This is due to Hurricane Sandy, which may affect up to 60 million people.

This damage has caused the a fall in crude oil prices in New York and a rise in gasoline prices. This is due to a number of refineries in New Jersey stopping production due to weather conditions. Falling crude prices may also be to do with decreased demand during this period due to the effects of Hurricane Sandy. This is in contrast to Hurricane Katrina in 2005, where crude prices spiked up to $75 from $66. This contrast may be explained by the fact that a significant percentage of US oil consumption was supplied by rigs in the Gulf of Mexico and also through imports via the Louisiana Offshore Oil Port.

The question therefore remains: is the market over reacting to the ‘super storm’ or will the recovery be slow and difficult?