April 18 (Bloomberg) -- A below-average Atlantic storm season in 2012 probably will provide little support for energy prices as natural gas trades at 10-year lows.
Only four hurricanes are expected this year, according to researchers at Colorado State University who pioneered long-range Atlantic forecasting. In total, the storm season that runs from June 1 to Nov. 30 will produce 10 named systems, compared with 19 last year, they said in a report April 4.
Natural gas has fallen 34% this year, the worst performer in the 24-commodity Standard & Poor’s GSCI index, as the U.S. recorded its fourth-warmest winter ever and as output rose with improved production techniques. Prices may slide further as forecasters predict a cooler-than-normal summer along with the diminished hurricane threat to the oil- and natural-gas-rich Gulf of Mexico.
“Your weather scenario is not at all positive,” said James L. Williams, owner of WTRG Economics in London, Arkansas. “It’s one where we could drop through $1.50 and maybe even bump a dollar, at which point you need to be a bankruptcy lawyer who knows about natural gas.”
Gas for May delivery rose to $1.961 per million British thermal units on the New York Mercantile Exchange today after touching $1.94, the lowest intraday price since Jan. 29, 2002.
Gulf Energy Interests
The Gulf of Mexico is home to 29% of U.S. oil output, 6.4% of gas production and 40% of refining capacity, meaning hurricane forecasts such as the one developed at Colorado State 29 years ago are closely watched.
A hurricane has winds of at least 74 miles (119 kilometers) an hour. Tropical Storm Don, which never grew more powerful than 50 mph, forced the shutdown of about 12% of oil production and 6.2% of gas output in the Gulf last July, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.
The power of major hurricanes, with winds of 111 mph or more, was demonstrated in 2005 when Katrina and Rita killed more than 1,800 people, caused $91 billion in damage and destroyed 113 energy platforms in the Gulf.
The storms, which struck within a month of each other, shut down 95% of oil production and about 30% of U.S. refining capacity, and closed almost every large natural gas processing plant from Galveston Bay, Texas, to Alabama, the Energy Department said in a 2006 report.
The total natural gas production lost in the 10 months following Katrina was equivalent to 22% of yearly output in U.S. Gulf waters, the department said. Gas futures hit a record $15.78 in December 2005.
Major Storms Outlook
Colorado State predicts only two major storms will form this year.
MDA EarthSat Weather and Commodity Weather Group LLC have predicted 11 storms will reach the 39-mph threshold to become named systems in 2012.
The season will fall below the 12-storm average because the Pacific Ocean may warm and form an El Nino pattern, said Phil Klotzbach, lead author of Colorado State’s report. El Nino creates high vertical wind shear in the Atlantic that keeps hurricanes from developing, he said.
An El Nino may also mean the U.S. has a cooler summer, said Matt Rogers, president of Bethesda, Maryland-based Commodity Weather Group. Last year, Texas had the hottest summer ever in the U.S. with an average temperature of 86.8 degrees Fahrenheit (30.4 Celsius), breaking the mark of 85.2 set in Oklahoma in 1934, according to the National Oceanic and Atmospheric Administration.
Rogers said he expects May to September to be 1.1% warmer than the 10-year normal, while falling 9.1% below last year. He predicts average temperatures in the Northeast will be about 2 degrees below normal.