Atlantic storms keep oil, natural gas traders on edge

By Myra P. Saefong, MarketWatch

Storms in the Atlantic haven’t packed a big punch, but the latest sweep of Tropical Storm Ernesto stands as a stark reminder of how quickly the Gulf of Mexico production outlook for oil and natural gas can change, especially since the hurricane season is far from over.

On Thursday, the U.S. National Oceanic and Atmospheric Administration updated its Atlantic hurricane season prediction, raising the number of expected storms for the 2012 season, which officially began on June 1 and ends Nov. 30.

NOAA now expects to see 12 to 17 named storms, including 5 to 8 hurricanes — of which 2 to 3 could become major hurricanes, with winds of at least 111 miles per hour. That compares to an initial outlook released in May calling for 9 to 15 named storms, including 4-8 hurricanes and 1 to 3 major hurricanes.

So far, only the storm system named Debby has caused any sizable Gulf of Mexico shut-ins of oil and gas production.

There hasn’t been any material impact from the hurricane season, but some storms that would minimally cause evacuations of offshore rigs, would impact inventory levels on a temporary basis.

Tropical Storm Debby, the fourth-named storm of the 2012 Atlantic hurricane season, caused severe flooding in Florida in late June, as well as some precautionary oil and natural gas production shutdowns in the Gulf of Mexico (GOM).

On June 23, about 7.8% of Gulf of Mexico oil production and 8.2% of natural gas production were shut in as Debby approached, according to data from the Bureau of Safety and Environmental Enforcement.

For now, the U.S. oil and natural gas markets have ample supplies, and some analysts say that Gulf of Mexico hurricanes won’t be quite as worrisome to the energy industry as they used to be.
Now only 5% to 6% of total U.S. natural gas supply is from the Gulf of Mexico, when it used to be closer to 20%.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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