Turning on the Weather Channel at around 11pm last night, I watched Dr. Steve Lyons, TWC’s “hurricane expert,” give his latest prognostication: Gustav was a dead fish. Haiti had ripped him a new one and wind shear from a departing upper level low was finishing the job. He noted that the computer models still had Gustav as a Cat 3 in the Gulf, but said this was based off the “erroneous” forecast that the models had Gustav a hurricane in 12 hours. Upon saying this, he scoffed, or as close as straight-faced-steely-eyed Steve Lyons has ever come to scoffing.

Well, fast-forward 12 hours, and chalk one up for the machines. Gustav strengthened from 45 to 70 mph, only 5 mph short of what the computer models had said. I say this all not out of disrespect out for Dr. Lyons, who I believe to be one of the best sources out there, but just to remark on the impressive job the models did with the storm.

Image: Latest Infrared Satellite of Gustav, showing it about halfway across Jamaica. It is holding itself together reasonable well and I expect it to emerge back over water as a 50-60 mph TS sometime after midnight.

Gustav only had about 18 hours to intensify before it made landfall in Jamaica this afternoon. At 8pm, its winds were still 70 mph, but based on the degrading cloud appearance, these will be reduced at the next advisory. Throughout its life, Gustav has embraced his inner Masochist: first he stalls just off-shore Haiti, which nearly destroyed him, and now he takes the longest possible route across Jamaica, an island he was never even supposed to impact until a sudden dip to the south.

However, there will be no stalling this time, and Gustav should exit the west coast sometime late tonight. Once the storm does so, it will be over the warmest part of the Caribbean, under an upper level anticyclone, and chugging away from land. I believe we will see some rapid intensification. The NHC calls for Gustav to reach hurricane status tomorrow, but I would not be surprised to see it reach a weak cat 2.

Image: Official NHC track overlaid with a map showing Rig density in the GOM. Right now, Gustav is headed towards the highest concentration of Rigs in the Gulf.

The forecast track has flip-flopped today from an east Texas/West Louisiana landfall to an east Louisiana/Alabama landfall, and back. Basically, anybody from Houston, Tx to Gulfport, La is at risk. If I had to pick a landfall location, I would say somewhere just west of Ragin Cajun’s house in central Louisiana. Such a landfall location is good for the US because (generally speaking) this region is less densely populated, but bad for the rigs since the waters off the coast are home to the densest concentration of infrastructure in the Gulf.

Image: Latest computer model guidance showing better agreement amongst models on the track of Gustav. Discount the NAM, as it poorly initialized the storm. Note at the end of the forecast period how both the GFS and BAMM stall Gustav as it nears the coast.

However, its final landfall location will have a lot to do with any center reformation over Jamaica, as well as its forward movement, and will not be pinned own until the storm enters the Gulf. A slower movement generally favors a more eastern track, as the high pressure ridge that is currently guiding the storm will have a chance to erode. A faster track will mean the high remains intact during its Gulf trek and would steer the storm westward longer.

Either way, Rigs are going to have to start evacuating their personnel in the next few days shutting down production.Here is a current estimation of the severity of the shutdown. Apparently, 100% of Oil and NG will be shut in for 2 days, with at least 20% shut in through late September. And this is without any more storms affecting the Gulf.

Image: Current Predicted Shut-In due to Gustav. Image Courtesy: Chuck Watson, KAC

Gustav’s intensity forecast is looking unfortunate for those who don’t like death and destruction. There are two good chances for rapid intensification. First, as mentioned, once Gustav exits Jamaica, it will be under very warm water and an upper level anticyclone. Second, once it enters the Gulf, it now looks to pass nearly directly over a warm water eddy that energized Rita and Katrina both to Cat 5s.

Image: Tropical Cyclone Heat Potential showing two areas of energy-rich ocean that Gustav will cross on its way into the Gulf.

The NHC takes the storm officially to a 115 Cat 3. Some of the the computer models, however, are far more aggressive. The GFDL takes the storm up to a Cat 4. The HWRF takes the storm to a mythical 205 mph. (Should such a storm verify, there will be no need to do “offshore drilling” as the surge will have emptied the Gulf and they can go out there with picks and shovels on dry land). While normally I would say these forecasts are way overblown, the fact that the models nailed Gustav last night, makes me reconsider.

Late in the forecast period, some of the models are forecasting Gustav to slow down as it nears the coast. The waters of the continental shelf are much shallower and cooler than the open ocean and should Gustav spend a lengthy period of time over such waters, it will have a chance to weaken a bit, possible a full category (about 15 mph). This is far down the road and needs time to verify, and would have little beneficial impact on preventing rig destruction.

Gustav is not the only news in the tropics. Far from it. Counting Gustav, there are currently 4 systems in the Atlantic that have a shot at developing in the next 3-4 days. Looking at the satellite picture, it reminds me of the famous “Parade of Storms” from 1995, the first year I followed the tropics as a young lad, in which Jerry, Humberto, Iris, and Luis were all active in the Atlantic.

Image: Famous “Parade of Storms” satellite from 1995, showing (from West to East): TS Jerry, TS Iris, Hurricane Humberto, and TS Luis.

Image: Current infrared of the Atlantic showing (from West to East): Invest 96L, TS Gustav, TS Hanna, and a developing low.

Tropical Storm Hanna developed this morning east of the Leeward Islands. It should move WNW to NW for 3-4 days before the steering currents collapse (seems to be a bit of a pattern this summer, doesn’t it?) and the storm meanders. Most of the computer models then take it west to west-southwest towards Florida, while a few curve it out to see.

Image: NHC forecast track for Hanna.

Hanna is currently under 15 knots of sheer and her low level center is exposed. The sheer is forecast to slacken in the short term and the models call for her to reach hurricane strength by late in the weekend.

An area of convection with a possible low level center has developed in the Bay of Campeche south of the Gulf of Mexixo. I give this a 40% chance of of becoming Ike in the next day before it moves onshore in Mexico. It will have no effect on oil/NG. In fact, it may have a detrimental effect should it hang around long enough as its outflow may interfere with Gustav as the two move closer in proximity.

Lastly, a very large wave out in the Atlantic has an area of low pressure associated with it, but little convection. Most of the computers develop this system and track it towards the Antilles. We will have several days to watch it. While it looks pretty hopeless right now, out of my new respect for the models, I give it a 50% chance of developing into Josephine.

As for trading, I believe today was a great entry opportunity. The combined forces of a bullish GDP report, profit-taking, and bearish EIA data sent NG down 9% at times, during the same time a Cat 3 storm was forecast for the gulf. I happily jumped in. I bought a man-sized share of VLO at 35.00 and a smaller portion of UNG at a cost average of 37.00. I also own OMNI, RIG, and CHK. I am quite overweight in energy right now, but believe this is a fantastic opportunity. However, with a three day weekend upon us and with Gustav set to make landfall the following day, I will likely trim or sell my positions in UNG and RIG tomorrow depending on the state Gustav is in. I am willing to hold VLO and CHK longer term, and OMNI is just a small lottery play.

Disclaimer: Hurricane Parties: Fun, but stupid. Evacuating: Neither stupid nor fun. Buying a truckload of VLO, CHk, and UNG: Both fun and stupid.