Hurricane Milton Intensifies as Investors Brace for Round 2

Too soon.

By now, everyone has seen the devastation Helene wreaked on those unlucky enough to lie along its path. 

The Category 4 hurricane left millions without power, may end up costing more than $200 billion in damages, and so far has killed 227 people — a number I expect will continue inching higher as the days and weeks continue. 

Helene left entire towns in utter ruin and is the deadliest hurricane we’ve seen on the U.S. mainland since Katrina smashed into the Gulf Coast almost 20 years ago. 

Now we’re getting ready to do it all over again.

Prepare to meet Milton.

I know it may feel a little too soon before we have to start dealing with another catastrophic storm, but it was almost expected. 

As I mentioned last week, the NOAA predicted that an above-normal hurricane season this year was likely, due to several factors such as near-record warm ocean temperatures, La Nina conditions in the Pacific, reduced Atlantic trades winds, and less wind shear. 

Once Milton’s maximum sustained winds exceed 155 mph, it’ll officially turn into a Category 5 storm. 

The frequency of these hurricanes may be giving a few of you a bit of déjà vu. 

Perhaps you might remember the 2017 Atlantic hurricane season, when Harvey battered Texas and Louisiana. Two weeks after Harvey dissipated, Hurricane Irma struck, and was followed a few weeks later by Hurricane Maria. 

It turns out that 2017 was a particularly devastating and active hurricane season, costing nearly $300 billion in damages. That year there were seventeen named storms, ten of which turned into hurricanes, six of which became major hurricanes. In total, 3,364 deaths were attributed to that storm season. 

So how bad will it get with Milton?

Below, you can see that Milton’s current projected path will take it directly through Central Florida: 

So far, the state is restricting its port activity, and we’ve already seen some producers in the Gulf of Mexico like Chevron shut-in some of its platforms. 

There is one peculiar part to this story that stands out.

You see, storms like Milton are typically bearish for oil and natural gas prices due to their path. Rather than heavily impacting our oil infrastructure along the Gulf of Mexico, these storms tend to cause demand destruction. 

Yet here I sit watching crude prices spike nearly 4% as I write this, with WTI crude trading above $77 per barrel. For the record, WTI prices have surged nearly 20% over the last four weeks!

To be fair, natural gas prices are getting pummeled at the prospect of Milton causing large-scale power outages. 

Still, crude oil is finding support from a host of factors such as the intense geopolitical tension in the Middle East. 

Throw in China’s recent stimulus package and OPEC+ delaying its plan to bring more output online by two months… Well, then you have yourself a recipe for higher prices. 

Just how high will oil go?

We’ll talk about that next time.