Sandy Causes Gasoline Spike

As Hurricane Sandy approached the Eastern Seaboard this week, there was a rash of panic buying in the gasoline market, as consumers and traders expected that supplies would be interrupted. Many of their fears were warranted, as pipelines, ports and refineries were disabled by the storm, with some facilities still out of service as of Friday morning.

Near the peak of the storm, gasoline futures prices exploded higher. The strongest rally came in November RBOB, which is gasoline for immediate delivery to New York's Harbor. That market climbed as much as 23.84 cents (+8.8%) per gallon during the storm, but fell back quickly once it became apparent that the damage was not as severe as had been feared.

During the course of the week, crude oil prices felt downward pressure since refinery shutdowns diminished demand for crude oil. As of midday Friday, crude oil for December delivery was worth $85.25 per barrel, down $1.03 (-1.2%) on the week.

OJ Sinks as Florida Stays Safe

For orange juice traders, the hurricane season can be tumultuous, as storms can destroy Florida's orange groves, which account for 80% of US production. This year's hurricane season left Florida largely unscathed, with no hurricanes making landfall in that state this year. There were a few near-misses, especially Debby and Isaac, but Florida has had a mostly quiet hurricane season and little damage to orange groves.

As a result, there have been a few quick upward bursts in orange juice prices as storms near Florida, but overall, prices have been squeezed nearly 20% lower over the last two months. This week alone, prices for frozen concentrated orange juice fell nearly seven cents per pound (-6%), falling to $1.05 Friday morning.

As the hurricane season comes to a close, OJ traders will quickly shift focus to consumer demand and the threat of a winter frost, which can cause large price movements in the months to come.

Like soybeans, beef cattle, and ethanol, domestic OJ prices can be heavily impacted by imports from South America. For example, Brazilian imports now constitute a major portion of the US orange juice market. As a result, OJ traders must keep an eye on Brazilian weather as well.