Industrials have been my favorite sector for the fourth quarter of this year; my latest recommendati...
Projections for an active hurricane season helped drive yesterday's commodities rally
05/28/2010 11:54 am EST
When the U.S. National Oceanic and Atmospheric Administration (NOAA) announced yesterday, May 27, that it was projecting one of the most active hurricane seasons on record for the June 1 to November 30, 2010 season, commodity traders did something.
Lots of something.
They bid up the price of oil and natural gas as a bet that a hurricanes would shut down at least some production in the Gulf of Mexico. West Texas Intermediate crude jumped 4.3% for the day. Futures for September, the peak month for hurricanes, climbed even more.
That surge in oil and gas prices combined with relief that China wasn’t planning a wholesale retreat from the euro to make the day a great one for global commodities. Copper for delivery in three months rose 2.3% on the London Metal Exchange, for example.
And that surge in commodities was one catalyst for yesterday’s big bounce in global equities.
What exactly did NOAA say?
This year’s hurricane season will include 14-23 named storms, the agency projected, with eight to 14 strengthening to become hurricanes. That would make the year one of the most active on record. 2009 was the quietest year in the last 12.
I don’t think an active hurricane season is good news for Gulf Coast communities and wetlands. A hurricane will act first as a giant egg beater whipping oil into the water, and then, second, will send huge volumes of water deep ashore in any storm surge to foul areas that might have otherwise escaped oil exposure.
For investors, an active hurricane season will mean another round—or two or three—of headlines about the Deepwater Horizon disaster and its consequences and costs.
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