Mike Zaccardi, CFA, CMT

June 1 is the arbitrary official start of hurricane season. The first storm of the year obviously can form before or after that date, and we have already experienced two named systems so far this year. A third could be on the way this week.

Cristobal would be the name. For now, it looks like it won’t be a huge storm, it is just June after all, but impacts to the northern gulf coast appear likely. As is often the case with tropical storms, the center of circulation is not all that important. The bigger question is how fast it is moving and where the rain will fall.

Tropical storms early in the year can be notorious for producing flooding conditions away from the center. It appears areas to the east of the low pressure area may see the big precip impacts – that extends even out to the Florida peninsula potentially.

For utilities and the energy market, while this particular system may not cause huge disruptions, it’s an early signal to be on the look out for an active year. The northwestern gulf coast is an important area for energy – yes, there is oil and natural gas production, but a big industrial characteristic of the region is the export of liquified natural gas (LNG). If LNG plants must halt operations, then that could be bearish for natural gas prices as it may mean a temporary decline in LNG export demand.

Another consideration is that a tropical storm would keep temperatures in check for affected areas, which limits afternoon heating and air conditioning demand – that too could be bearish for power prices in the Texas, MISO South, and Southeast power regions.

So there are a slew of potential impacts for utilities to consider.

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Map source: WeatherModel.com (used with permission)