Hurricane Katrina, or why the price of petrol follows an annual cycle

Within the section "Why are there annual cycles?" today we will analyse several pieces of objective data showing how an atmospheric phenomenon can influence the price of an asset.

To begin with, let's remember the following piece of news published in La Vanguardia on 30 August 2005.

EL HURACAN "KATRINA" PROPULSA EL PRECIO DEL PETROLEO POR ENCIMA DE LOS 70 DOLARES. (Hurricane Katrina sends the price of oil soaring over 70 dollars)

Two years earlier in 2003, you may remember that the price of oil was at 30$.

Now let's go to the Department of Commerce of the United States, specifically to the Atlantic Oceanographic and Meteorological Laboratory, which is one of the facilities of the National Oceanic and Atmospheric Administration.

Here we can find the annual cycle of hurricanes

http://www.aoml.noaa.gov/hrd/tcfaq/G1.html

ciclo_huracanes

We observe that there is a spectacular concentration of hurricanes in August, September and the beginning of October.

And finally let's take a look at the oil cycle: one of the first articles that we published on our web on 8th September 2008 was an investment proposal in which we proposed buying oil on 10th December. Here we can see the outcome of this proposal .

ciclo_petroleo

If we compare the two cycles we can observe the following:

1.-The price of oil reaches its peak in the period of the year in which the greatest number of hurricanes are found.

2.- When the frequency of hurricanes diminishes significantly, from the beginning of October, the price of oil also begins a steep descent.

Although we are unable to affirm that

Period of hurricanes in the Gulf of Mexico = Period of maximum oil prices

we can affirm that there is a cause/effect relationship between the two cycles.

So, now four years later when the price of oil is around 70 dollars, we can say the following:

In the coming months we will enter fully into the hurricane season and so if there is going to be a hurricane like Katrina, which we hope will not be the case, it will almost certainly be in the next four months.
If there is a highly devastating hurricane it will certainly have an effect on the price of oil.
There is always a risk in speculating but it is better to speculate on price rises than price drops in the case of the price of oil.

This year the price of oil was approximately 40$ at the beginning of the upward phase (day 31, corresponding to 25 February). The minimum was reached on day 25 of the market at 33,5$, six days before the expected date.

The yield of this phase 2 is over 50%, when the expected yield was 14%. In these cases the downward phase 3 is normally advanced and, therefore, it seems more sensible to sell oil bought on 25^th February at a nice profit rather that taking an undue risk in search of every last penny of gain.

Up until now we based our thinking only on the result of studies in deciding when and how to invest, now we are also seeing the causes that influence the result of the studies.

Y por último el ciclo del petróleo, uno de los primeros artículos que publicamos en nuestra web el pasado 8 de setiembre del 2008, también podemos recordar la propuesta de inversión, Que proponíamos comprar petróleo el diez de diciembre, y también el resultado de la propuesta.

katrina_2

Si comparamos los dos ciclos se puede observar lo siguiente:

katrina_3

Aunque no podemos afirmar que:

Periodo de Huracanes en el golfo de Méjico = Periodo de precio máximo del petróleo

Sí que hay una relación causa/efecto entre los dos ciclos.

Por tanto en estos momentos que estamos con el petróleo a 70 dólares 4 años después, podemos decir lo siguiente

En los próximos meses entramos en el periodo de huracanes , por tanto si hay un huracán como el Katrina, que esperemos que no, probablemente será en los próximos 4 meses.
Si se produce un huracán muy devastador seguramente influirá en el precio del petroleo.
Especular siempre tiene un riesgo, pero es mejor especular al alza que a la baja con el precio del petróleo.

Este año al inicio de la fase alcista (día de mercado 31, que correspondía con el 25 de febrero) el petróleo estaba a 40$ aprox. El mínimo se hizo el día de mercado 25 cuando llegó a 33,5$, seis días antes de la fecha prevista.

El rendimiento de esta fase 2 está siendo superior al 50%, cuando el rendimiento esperado era del 14%. En estos casos la fase bajista 3 se suele avanzar y, por eso, parece más sensato vender el petróleo comprado el pasado 25 de febrero con unas ganancias muy atractivas que arriesgarnos buscando el último centavo.

Hasta ahora solo nos basábamos en el resultado del estudio para decidir invertir, ahora además estudiamos las causas que inciden en el resultado del estudio.

Annual Cycles

Hurricane Katrina, or why the price of petrol follows an annual cycle

Comments