Commodities Corner: Atlantic hurricane season ready to rile up storm clouds for oil and gas

by | Aug 18, 2023 | Stock Market

News that a rare tropical storm may hit the Southwestern United States in the next few days should serve as a reminder that the energy market may still see significant disruptions with hurricane season in the Atlantic having just entered its peak. Several developing weather systems having the potential to disrupt oil and natural-gas production, as well as refining activity, in the Gulf of Mexico.

“There are growing concerns that the weather in the Atlantic could get ugly very quickly,” said Phil Flynn, senior market analyst at The Price Futures Group, in a Friday report. “We have had a relatively quiet hurricane season so far, but now we’re getting into the high point of the season and the tropical storm map from the National Hurricane Center is again looking like somebody spilled some coffee on it.”

U.S. National Hurricane Center’s 7-day graphical tropical weather outlook as of Friday, Aug. 18 at 8am Eastern time.

U.S. National Hurricane Center

““…the tropical storm map from the National Hurricane Center is again looking like somebody spilled some coffee on it.” ”

— Phil Flynn, The Price Futures Group

Atlantic hurricane season runs from June 1 to Nov. 30, with most activity happening between mid-August and mid-October — and Sept. 10 marking the peak of the season, according to the U.S. National Oceanic and Atmospheric Administration. As of Friday, there are at least four tropical waves to keep an eye on — with at least two of them with a pretty good chance to get into the Gulf of Mexico and disrupt oil and gas operations, said Flynn.   So far this year, oil and natural-gas prices haven’t see much impact from the risks to operations in the Gulf. As of Thursday, U.S. benchmark West Texas Intermediate crude

based on the front-month contract, traded around 1.7% lower month to date and has edged up by 0.2% for the year, according to Dow Jones Market Data. U.S. natural-gas futures

have lost 0.5% this month and dropped by 41% year to date. On Aug. 11 NOAA updated its 2023 Atlantic Hurricane Season Outlook report, raising its prediction to an “above normal” level of activity from a “near normal” level. It now sees a 70% chance of 13-21 named storms, with six to 11 of them potentially becoming hurricanes and two to five of those potentially becoming major hurricanes. The 2023 Atlantic hurricane season started early this year, with the National Hurricane Center on Jan. 16 issuing a tropical weather outlook for a low-pressure system north of Bermuda. “Don” briefly became the first hurricane of the season on July 22. Monitoring Atlantic hurricanes are important to the oil and natural-gas market given that the Gulf of Mexico federal offshore oil production accounts for 15% of total U.S. crude-oil output, while federal offshore natu …

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