Devoted to understanding the basics and fundamentals of investing

Oil prices briefly rose above $80 a barrel today, and finished at an all time high of $79.91. The unexpected drop in inventories was partly to blame for the hike, but increased tropical activity was another culprit.

Tropical Storm Humberto has formed and now sits just off the Galveston, Texas coastline. The maximum winds associated with the storm are 50 mph, but the storm is expected to strengthen slightly before making landfall sometime tonight between 9 pm and midnight CDT just to the east of Galveston. The storm is expected to dump up to 10-12 inches of rain to the already-saturated coastline of Texas. The storm is unlikely to cause any damage to the oil rigs that sit in the western Gulf of Mexico, since the storm is expected to have a storm surge of just 2 to 3 feet.

Tropical Depression Eight has also formed out in the Atlantic Ocean, about 1,000 miles east of the Lesser Antilles. This is likely to become Tropical Storm Ingrid within the next 24 hours, and could affect the United States coastline sometime next week if it stays together.

The two storms have helped remind investors that this is, on average, the busiest week for tropical activity. Generally the rule is, the greater the tropical activity, the higher oil prices go. Energy stocks such as Chevron (NYSE:CVX), BP (NYSE:BP), Schlumberger (NYSE:SLB), and Valero (NYSE:VLO) may benefit if the tropics ramp up in activity for any significant amount of time.

Tropical Storm Humberto is unlikely to cause any catastrophic damages that will move oil prices in any significant way, but the storm could cause some minor disruptions if severe flooding occurs. Tropical Depression Eight has the potential to cause problems if it happens to hit the Florida Coast and then head into the Gulf of Mexico as some major hurricanes have in the past couple of years.

Just a couple of days ago I posted about the future of oil prices and the energy sector, and already the higher prices predicted are coming true. I suspect these high prices are here to stay.

Keep an eye on the weather forecast in the next few days, the tropics are heating up, and they may provide an opportunity to make some money through investing in the energy sector.

If you enjoyed this article and would like to sign for an RSS feed from this site you may do so by clicking here.