Markets Brace for Hurricane Season TurmoilBy
Location, number of storms point to an active hurricane season
More storms raise risks for energy, agriculture and property
With the heart of the Atlantic hurricane season near, two early tropical storms have raised fears that oil, natural gas, insurance and agriculture markets will face more weather-related peril as fall approaches.
Tropical Storm Don formed Monday about 485 miles (780 kilometers) east-southeast of Barbados, the second to emerge in the early stages of the 2017 hurricane season in an area typically most active in late August and September. Don, which was downgraded overnight Tuesday, is also the Atlantic’s fourth storm of the season, a milestone that usually isn’t crossed until Aug. 23.
Since 1851, in years when early storms formed, four went on to be among the top 10 in terms of system strength, and two -- 2005 and 1933 -- were first and second respectively in the number of storms, according to Jeff Masters, co-founder of Weather Underground in Ann Arbor, Michigan. In 2005, a record 28 storms formed including Hurricane Katrina.
“That’s some pretty nasty company to be in,” Masters said by telephone. “We’ve now had two tropical storms form in the tropical Atlantic before August 1.” It’s “likely a harbinger of a more active than usual Atlantic hurricane season.”
As the numbers increase, so do odds that a tropical storm or hurricane will rattle around in the western Caribbean or Gulf of Mexico moving energy and agricultural markets. Even weaklings cause problems. In June, Tropical Storm Cindy, a relatively sluggish system, managed to shut down about 17 percent of Gulf oil output and forced evacuations at production platforms, according to the U.S. Bureau of Safety and Environmental Enforcement.
The southern Gulf near the Bay of Campeche hosts extensive operations by Mexico’s state-run oil driller Petróleos Mexicanos. U.S. oil and gas platforms and rigs are concentrated further north off the Texas and Louisiana coastline. The offshore region is home to about 17 percent of U.S. crude oil output and 4.1 percent of gas production. Onshore, about 45 percent of the country’s petroleum refining capacity and 51 percent of gas processing is along the coastline.
Meanwhile, Florida is the world’s second-largest orange juice producer behind Brazil and the largest U.S. grower of cane sugar. Then there is coastal property -- an estimated $28.3 trillion worth of homes, businesses and infrastructure is vulnerable to hurricane strikes in the 18 Atlantic U.S. coastal states, according to the Insurance Information Institute.
Two storms have formed before Aug. 1 between the Caribbean and Africa in only 12 years since 1851, and “most were pretty active” seasons, said Phil Klotzbach, lead author of the Colorado State University seasonal hurricane forecast. The last time two storms showed up there before Aug. 1 was 2013, when 13 storms and two hurricanes emerged.
Fading El Nino
Earlier this month, the university raised its seasonal forecast to 15 storms, up from 11 in April. The heart of the Atlantic hurricane season starts about Aug. 20 and runs through early October when the ocean between the Caribbean islands and the coast of Africa spawns most tropical storms.
Another worry is the fading odds that the Pacific Ocean will warm and an El Nino will form. A cooler Pacific means there could be less wind shear that can blunt storms across the Atlantic, said Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland. Wind shear tears at the structure of tropical storms and hurricanes weakening or destroying them.
“It does concern me that things will get perked up once we get into the core of the season,” Rogers said by telephone.