By Timothy S. Snyder, Matador Economics
Markets are tense early this morning after a weekend of severe weather and attacks on U.S. shipping and warships by the Houthis. We’re watching several “tripwires.”
Over the weekend, the Houthi rebels out of Yemen launched ballistic missiles and drone attacks against shipping in the Red Sea and on U.S. warships currently in place to keep the seas safe. Once again, everything being transported by ship heading to the U.S. is now being rerouted, and we’ll see increasing costs due to rerouting for safety.
The U.S. did respond to these attacks, but it is obvious the Iranians are providing missiles and funding to the Houthis and prodding this conflict to expand and make a big hit on U.S. interests. This is a developing story.
Goldman Sachs analysts have cut the price forecast for crude oil as expectations of slowing U.S. economic activity dampens demand. With the Fed meeting the next two days, there is speculation Fed officials may be anticipating an economic slow-down. The problem is the Fed has been leading from behind, and seldom do they step in ahead of a calamity to alter an economic trajectory.
With OPEC likely adding back production, even if slowly, the pressure on prices will increase, and we should see the price for crude oil drop. We’re not expecting a crippling drop, but we are expecting to see prices continue to ease.
U.S. winter weather
As was expected, we had a very unsettled weekend with incredible winds, dust storms, heavy rains, hail and tornados. There have been at least 40 deaths due to the severe weather. The Central and Southeastern U.S. were in the bullseye, and this morning there are very cold temperatures and frost across the area. The Central Plains are now under Red Flag Warnings with very dry and cold temps.
The severe weather ran from near Chicago and moved southeast to the Atlantic. Severe thunderstorms weren’t the only dangerous weather, as the remnants of a massive dust storm rolled from the eastern slopes of the Rockies and southeast, bringing dust and fire weather into New Mexico, Texas, Louisiana, Kansas, and Oklahoma. It’s going to be a tumultuous spring.
More energy commentary is available at www.matadoreconomics.com
