Harvey came ashore near Rockport, TX as a category 4 hurricane, with 130 mph winds; but, the worst flooding has yet to come. More than two feet of rain has fallen, so far, over most of the Houston metro area. News footage of flooded neighborhoods and life saving water rescues have been heartbreaking. Unfortunately, there could be another 10″-15″ on the way for parts of Houston. The image below shows the latest NAM model forecast of additional rain:
Why will the rain continue? The path of Harvey tracks back to a more favorable location: the Gulf of Mexico. In that larger body of water, the warm moist air is more conducive for a storm to regain power. The low will strengthen and pick up moisture starting late today into Tuesday night. A second landfall will occur sometime on Wednesday.
What stocks/futures were impacted?
We created a table of current market impacts from Harvey. Generac (GNRC) produces commercial and residential generators. Home Depot (HD), Lowes (LOW) and Lumber Liquidators (LL) are retailers that have significant market share in home improvement goods. The remainder of the table include futures and stocks related to energy and cotton.
Parts of the energy sector have reacted differently to the aftermath of Harvey’s wrath. Natural gas and oil rigs can sustain 60 ft waves and category 5 hurricanes, limiting any damage. Natural gas futures are up today, as offline production is more than anticipated (production below 71 bcf/day). Although 105 out of the 737 manned platforms in the Gulf were evacuated, production should resume immediately once conditions improve. Gasoline (RBOB) refineries are another story. S&P Global Platts estimated that we are losing 2.2 million barrels per day from refinery shutdowns. Due to impassable roads, any permanent damage to infrastructure remains unknown. October RBOB futures prices have risen ~6% from last Wednesday’s opening to today’s. For more information on how Harvey will continue to impact the energy market, please email us at subscriptionsbestweather@gmail.com.
Cotton & Harvey
Cotton is another market that traders have been monitoring for Harvey related opportunities. When cotton bolls are open, heavy rainfall can knock off the fibers. There is also some concern of flooding in some of the storage facilities. However, only about 14% of Texas cotton grows in the southeast part of the state, and this amounts to only 5% of the total US cotton production. In order to impact the nation’s supply/demand equation, there would have to be crop damage in the areas up the Mississippi river. The image below shows the European forecast from last Friday with cotton growing areas highlighted:
