This is part of what we were thinking about back on January 29 when we mentioned:
...An interesting situation. Depending on how the equities act over the next few weeks this may be setting up an odd little pair trade, long U.S. natural gas producers, short U.S. insurers and/or international reinsurance companies.
More to come next month.
From the re/insurance mavens at Artemis, March 4:
It’s that time of year when we anticipate a range of seasonal hurricane forecasts to be published over the coming weeks, but long-range forecasts are already calling for the 2024 Atlantic hurricane season to be extremely active, with one forecaster calling for a “hurricane season from hell” in 2024.
The climatological shift from last year’s El Niño is expected to drive La Niña conditions over the coming months, with some now anticipating a strong La Niña by the accepted peak months of the Atlantic hurricane season.
El Niño is said to be weakening rapidly and La Niña conditions set to emerge, which typically weakens wind shear and provides for atmospheric conditions that are more conducive to tropical storms and hurricanes forming.
It means the tropical region where storms form is expected to see lower wind shear across a much larger area, while wind shear would also be expected to be lower nearer to land and in the Gulf of Mexico as well, under La Niña conditions.
Adding to expectations that the 2024 Atlantic hurricane season could be particularly active is the fact the sea surface temperatures are already between 1 and 3 degrees Celsius above normal in areas where hurricanes tend to form or get their ocean-derived fuel from.
Forecasters have said that currently there are no factors against the 2024 hurricane season being a very active one, while all factors are supportive of an active year ahead.
In fact, sea surface temperatures are already said to be at June and near July levels in parts of the Atlantic, suggesting the ocean could already be primed to fuel storm formation as soon as conditions become conducive.
The timing of a shift to La Niña could still be critical though and the earlier it occurs the more likely the 2024 Atlantic hurricane season is very active, experts say.
Already we have two long-range forecasts to digest, both of which suggest 2024 could be a challenging Atlantic hurricane year for insurance, reinsurance and insurance-linked securities (ILS) market interests.
First, Tropical Storm Risk (TSR), which right back in December said that Atlantic tropical activity could be 30% above the near and 50% above the long-term norms.
TSR calls for 20 tropical storms to form during the 2024 Atlantic season, 9 of which are forecast to become hurricanes and 4 to develop into intense or major hurricanes, driving a seasonal Accumulated Cyclone Energy (ACE) index of 160.
TSR cited the very warm Atlantic ocean temperatures in that December forecast, but had not at that stage suggested a shift to La Nina was likely. TSR will update its forecast again in the coming weeks and we could see these high storm numbers increase, if the forecaster expects La Nina to be a significant factor for the 2024 hurricane season.
Also in December, forecast firm Weather Bell said that 2024 could be the “hurricane season from hell.”
Weather Bell opts for between 25 and 30 named storms, an extraordinary amount if that plays out, with 14 to 16 hurricanes and 6 to 8 major hurricanes, while ACE is forecast at between 200 and 240.
Weather Bell said, “A hurricane season from hell is shaping up for 2024. Very high levels of activity should be prepared for in areas that were essentially left untouched in 2023.
“The El Niño will reverse to a La Niña, while the Atlantic basin will be ideal for development. Very warm water in the northeastern Pacific is likely to mean the kind of pattern over North America that was similar to 2005, 2007, and 2020. This invited storms to reach the U.S.”....
....MUCH MORE
The day we wrote our little pair-trade teaser the natural gas futures settled at 2.0540. It continued falling until February 20 when the futures got as low as 1.5220. That's cheap, and below the cost of production for some producers. The futures are now back to 1.8020 but still over 10% below the January 29 settle.
We'll be back this weekend, or more likely Monday for the insurance/reinsurance side of the trade as well as some other stuff including what made us look at the possibility of a rockem-sockem hurricane season (and maybe half-decade)
