U.S. Natural Gas May Get 4th-Qtr. Boost From La Nina (Update2)
By Reg Curren
Sept. 28 (Bloomberg) -- Natural gas prices in the U.S. may get a boost in the fourth quarter from a deep cold snap produced by a La Nina weather pattern, the first in almost seven years.
Bitter cold typically increases gas consumption for heating needs, lifting prices.
The last La Nina hit in November and December 2000, spurring the coldest two months on record, according to the National Oceanic and Atmospheric Administration's Climatic Data Center.
``The three-month average water temperature is now just crossing the threshold,'' said Tom Downs, a New York-based Weather 2000 Inc. meteorologist in a telephone interview yesterday. ``I'm sure in about a week you'll hear the government say there is an official La Nina event.''
Natural gas futures traded on the New York Mercantile Exchange more than doubled between Nov. 1 and Dec. 31, 2000, hitting $9.775 on Dec. 29 from $4.686 on Nov. 1, according to data compiled by Bloomberg.
Futures on the New York Mercantile Exchange fell 4.9 cents, or 0.7 percent, to settle at $6.87 per million British thermal units.
La Nina refers to cooling ocean surface temperatures off the western coast of South America. The phenomenon affects the jet stream, alters storm tracks and creates unusual weather patterns.
North America can experience ``increased storminess, increased precipitation and an increased frequency of significant cold-air outbreaks'' during a La Nina year, according to the U.S. Climate Prediction Center in Camp Springs, Maryland.
No Guarantee
Weather 2000's Downs said there is no guarantee that temperatures this year will repeat the frigid weather of 2000.
``The frustrating thing for the public and meteorologists is there's not 100 percent linkage'' between cold weather and La Nina, said Downs. ``There's a lot of variability with La Nina, from a natural-gas perspective that fall of 2000 is one everyone remembers, then in January it flipped around'' and warmed up.
The U.S. Climate Prediction Center in Camp Springs, Maryland, last week said most of the nation would probably see above-seasonal temperatures over the next three months.
Early indications suggest it will be the Northwest that will experience below-normal temperatures. That region of the U.S. doesn't have the population required to significantly boost demand, said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, New Hampshire.
Meaningful Demand
``Mild La Ninas have delivered meaningful demand changes to the gas market and markedly so in the fourth quarter with such a weather driver,'' said New York-based Barclays Capital energy analyst George Hopley in a Sept. 21 report.
Gas demand in the fourth quarter of 2000 was 500 billion cubic feet higher than for the comparable period in 2006 and 360 billion above the five-year average, said Hopley.
La Nina ``could potentially work off surplus storage prior to the peak winter demand month of January,'' he said.
U.S. inventories rose 74 billion cubic feet to 3.206 trillion cubic feet in the week ended Sept. 21, the U.S. Energy Department reported yesterday. Supplies are 238 billion cubic feet above the five-year average of 2.988 trillion cubic feet.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net .
Last Updated: September 28, 2007 15:46 EDT
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Ladies & Gentlemen, place yer bets!! I have turned somewhat bullish on North American natty and have made some recent investments in companies with significant exposure to US natty prices. I believe any higher-than-normal warmth in the US northeast for October will be overshadowed by all the talk of La Nina a la late 2000, such as in the above piece.
To put things into perspective, during the last 5 years, the average weekly injection for October is 48, whereas the average weekly draw in December is 119. So let's say October is 10% warmer than normal, but the forecasts are for December to be 10% colder than normal. The net effect on natty futures would have to be bullish. |
