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Week Ahead: Trading Gustav

Friday, 29 Aug 2008 | 6:25 PM ET

All eyes are on Gustav as it bears down on the Gulf of Mexico. And Tropical Storm Hannah appears to be close behind. Is there a trade, here?

"Unless you want to trade electronically on ICE and NYMEX over the weekend, I would be going home flat and waiting to see what happens,” counsels Tradition Energy director of market research Addison Armstrong.

“There is a long time between now and Tuesday morning, when the storm is projected to hit the Louisiana coast. If it were to veer south towards Mexico or east towards Florida, that would be very bearish for crude and the greater energy sector because the storm would then move clear of the primary producing and refining areas in the Gulf and along the coast.”

In fact, the storm to watch might not be Gustav at all. It could very well be Hannah!

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“If Tropical storm Hanna is a full-blown hurricane and is also forecast to enter the Gulf, then prices should move even higher,” explains Armstrong. That’s because Hanna in the Gulf will prevent rapid damage assessment and delay the start of repair activities.

"A one-two punch from Gustav and Hanna could cause extensive damage to the rigs and sub-sea pipelines that connect the wells in the Gulf to the mainland," Armstrong says.

In that scenario, repairs could take months and "you would want to be long oil field services companies, perhaps through the Oil Services HLDRS, Armstrong concludes.


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Trader disclosure: On Aug 29, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Karabell Owns (AAPL), (BHP), (CHL), (GLD), (GOOG), (JPM), (NOK), (SLB); Najarian Owns (LEH) Puts Spread; Najarian Owns (RIMM) Call Spread; Najarian Owns (WFC) Call Spread
Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (NOK) And Is Short (NOK) Call; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (NOK), (SUN), (TSO), (VLO); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm And Finerman Own (GLNG); Finerman's Firm Is Short (IYR), (IWM), (MDY), (SPY), (IJR), (BBT), (COF); Terranova Owns (NOV), (KOL), (X), (GS), (SA), (VLO), (RIMM), (AAPL), (EOG); Terranova Owns (POT); Terranova Owns (FCX)
Terranova Owns (AIG) Puts; Terranova Is Long Dec. 2008 Reformulated Gasoline Crack Futures

Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BRE), (CNTY), (CLB), (OFC), (DLR), (ESS), (EXR), (FL), (IAT), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (SKT), (BLV)

Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

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