The 2022 hurricane season is off to a quiet start, but the tropics seem to have awakened in recent days and are likely to ramp up in September — the peak month for tropical storm activity. Forecasters are still predicting an above-average season, calling for as many as 10 hurricanes and up to five major ones. That would mean greater volatility for energy markets in any year, but the stakes are arguably higher this year than any time in recent memory — especially for natural gas. That’s because prices are already at the highest level in over a decade and flirting with the $10/MMBtu mark. The gas market is tight domestically and globally, particularly in Europe. Lower 48 storage remains near the five-year low. European gas storage, after lagging far behind, has caught up to the five-year average this month, but the continent is still dependent on a consistent stream of U.S. LNG cargoes, particularly as it works to wean itself off Russian gas supplies. What happens when you add to that the prospect of hurricane-related disruptions to Lower 48 production or LNG exports, or both? Much of that will come down to the timing, path and strength of any impending storms. That’s a lot of unknowns, and where there is that much uncertainty, volatility is sure to follow. With the National Hurricane Center (NHC) predicting high chances of potential cyclone development as early as later this week, today’s RBN blog considers the possible implications for the U.S. gas market balance.
The hurricane season officially began on June 1, and it’s been eerily quiet so far with only three named storms to date, just one that entered the Gulf of Mexico and none that escalated to hurricane status. Nevertheless, forecasters at the National Oceanic Atmospheric Administration (NOAA) and Colorado State University (CSU) earlier this month reiterated their forecasts for an above-average season. While NOAA pared back its confidence level in its forecast to 60%, from 65% previously, and reduced the high end of the ranges by one, it is still calling for 14-20 named storms reaching tropical storm strength or stronger before hurricane season ends on November 30. Of those, it expects six to 10 to become hurricanes, with three to five of those turning into major storms reaching Category 3 or stronger. The average for the 1991-2020 period is 14 named storms, seven hurricanes and three major hurricanes.
CSU, meanwhile, pared back its prediction to 18 named storms, from 20 previously, including eight hurricanes (vs. 10 previously) and four major hurricanes (down from five previously). The CSU forecast also puts the probability of at least one of the major hurricanes making landfall along the Gulf Coast at 50%, compared to the average for the last century of 30%. With 89 days of hurricane season behind us and the halfway point approaching, that means they would have us believe that the latter half of the season could be jam-packed with tropical storm activity.
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