In a quick update about Hurricane Harvey, I warned clients two days ago that i thought most forecasters were undoing just how strong Harvey would be.
You can see one of my earlier reports here.
While most models did not forecast Harvey to be more than a tropical storm, warm ocean temperatures, combined with no shear as El Nino is gone, could develop Harvey into a major hurricane. Also, something we call the MJO is in a very favorable phase and is ideal for explosive development. For a good definition of the MJO, please go here.
So which markets may be affected by Harvey’s path? About 5% of the U.S. cotton crop (BAL) could be hurt heavily but rains exceeding 10-15″ and if Harvey moves towards Louisiana next week, more issues to the cotton crop could ensue. As I mentioned to clients as early as last week, Harvey will hug the coast longer than most other firms felt and if so, it could have some short-term impacts on both natural gas (UNG) and also the crude oil market (OIL). Again, the cool weather has kept natural gas under pressure at times, but the possibilities of a much more active hurricane season into late October could be bullish natural gas in the weeks ahead. Here again is our study from a week ago.
Finally, with the chances for a weak La Nina this winter, this could open the door for colder winter weather. Hence, the downside in natural gas in my opinion is limited. Traders should look for some natural gas stocks that have really been beaten up over the last few years as possible good longer term plays.
Hurricane Harvey will likely be stronger than others feel and could affect rigs and some western most natural gas platforms into early next week. With U.S. crude oil stocks coming down for 8 straight weeks, an active hurricane season will likely keep crude oil prices from falling far the next few weeks.
Here are some natural gas stocks to look at
For more information about trading weather markets, please email me at email@example.com. It promises to be one of the more active hurricane seasons in at least 4-5 years.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.