Correlation between oil prices and hurricane seasons in US

Map of Atlantic hurricanes in 2008 season. 

This time I want to talk about annualcycles.com, a very interesting Blog about market and financial markets cycles. Albert Pares in this post talks about the high correlation betwen oil prices and a metereological indicador. This study shows a huge correlation between the beginning of the American atlantic hurricane season from June to October, and a clear oil prices increase.

Given the huge correlation, I suppose it will be very important the intensity of each hurricane season, so I attached the forecast for this season which started in June. The US service, NOAA estimates a normal or low level hurricane season for 2009. These are the NOAA projections:

“NOAA’s 2009 Atlantic Hurricane Season Outlook calls for a 50% chance of a near-normal season Figure 2. The outlook also indicates a 25% chance of an above-normal season and a 25% chance of a below-normal season. See NOAA definitions of above-, near-, and below-normal seasons. The Atlantic hurricane region includes the North Atlantic Ocean, the Caribbean Sea, and the Gulf of Mexico.

This outlook reflects the ongoing conditions associated with the high-activity era that began in 1995, combined with the uncertainty regarding the possible development of El Niño and/or whether cooler-than average sea surface temperatures (SSTs) will persist in the eastern tropical Atlantic.

The likelihood of competing climate factors leads to several physical scenarios for the hurricane season. Some scenarios are more likely than others, and these are reflected in our stated probabilities of expected activity. Based on these scenarios, we estimate a 70% probability for each of the following seasonal ranges:

    * 9-14 Named Storms,

    * 4-7 Hurricanes

    * 1-3 Major Hurricanes,

    * An ACE range of 65%-130% of the median

These likely seasonal ranges have been observed in about two-thirds of past seasons having similar climate conditions to those expected this year. They do not represent the total range of activity seen in those past seasons.”

Outlook for 2009 Atlantic hurricane season (source: NOAA)