Thursday, August 13, 2009
Weather and Oil
It is fascinating how the financial markets and real world are so intertwined. Take for example, the weather. Recently reading about the hurricane season I realized I had not added that as a factor for oil prices. Duh!
The chart you see here shows the frequency of hurricanes throughout the year. A nice FAQ from NOAA explains the various colors. The majority of severe hurricanes occur in August and September.
By mid August we should be well into the hurricane season and yet we have not had any major storms in the Atlantic. The National Hurricane Center shows in real time any storms and their predicted tracks. As of today there are no major storms threatening the Gulf of Mexico. Storms travelling up the East Coast will not have the same influence on the energy markets as one that enters the Gulf of Mexico. The Gulf is home to a large number of oil and natural gas pumping operations as well as a large portion of the refining capacity of the United States. Not only did Hurricane Katrina (which made landfall on August 29, 2005) devastate New Orleans, it severely hampered the energy capabilities of the U.S. for several months.
Keep an eye on the National Hurricane Center web site. If you see a storm forming with a high probability of entering the Gulf, you'll see oil prices perk up.