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Who Killed Amaranth? Academic Weather Forecasters Admit They Called 2006 Wrong

It wasn’t just Amaranth energy trader Brian Hunter who thought this was going to be a tough hurricane season. Some of our most prestigious weather scientists were making dire predictions, according to a report from Bloomberg news.

In many years, "Dr. Gray's Tropical Storm Forecast," the title of a Colorado State Web site where the free report is updated monthly during the hurricane season, proved uncannily accurate. Early in 2002, 2003 and 2004, the reports correctly predicted the number of named storms in the Atlantic Ocean and Gulf of Mexico for the entire year…
Last year, when a record 28 named storms formed in the Atlantic, the Colorado State report sounded an early alarm, warning in May 2005 of "a well-above-average hurricane season" and predicting 15 named storms.
That track record is one reason this year's first forecast, published in April, drew so much attention.
"We foresee another very active Atlantic basin hurricane season," Klotzbach and Gray wrote. They predicted 17 named storms, five of them intense hurricanes. The paper said there was an 81 percent chance of a major hurricane striking the U.S. coastline. It put the risk of one of them hitting the Gulf Coast, the center of U.S. oil production, at 47 percent.

As it turned out, no major hurricanes struck the US coastline, and that calm helped keep down the price of oil futures. So when Hunter made large bets with Amaranth money that spreads in gas futures would widen due to hurricanes, he wasn’t merely repeating the strategy that worked for him in 2005. He was adopting an investment strategy based on the best available opinions of weather experts.
Investing: The hurricane forecast that hit Amaranth hard [Bloomberg in the International Herald Tribune]