CLICK ON THE VIDEO ABOVE TO HEAR ABOUT LA NINA, SUGAR PRICES, THE EASING OF THE BRAZIL DROUGHT, AND THE BIG WESTERN STORM BY OCT 26TH
LA NINA HAS CAUSED COMMODITY MARKETS FROM NATURAL GAS TO SUGAR AND COCOA TO BRING DOWN THE CRB COMMODITY INDEX
Commodity markets have been in a major bull run for the past year or so inspired by a surge in precious metals such as silver and copper, a rebound in crude oil prices, and a recent soaring natural gas, sugar, coffee, cotton, and wheat market.
The record hot U.S. summer is an indication of Climate Change on steroids. The western U.S. drought helped to exacerbate the summer heat and help natural gas prices soar. Why? Hydropower was cut off to the west, and natural gas was the alternative. An active hurricane season in the Gulf and historical tight supplies of natural gas in Europe and Asia have resulted in strong LNG natural gas exports from the U.S.
However, over the last two weeks, natural gas prices have fallen sharply inspired by my forecast of a warm late fall and weak demand. Plus, the drought out west will be easing a bit. This will allow electric companies to switch back to hydropower following the historical summer drought. This will not happen right away, and a lot more rain will be needed, but it is a start.
LA NINA GROWING STRONGER means a warm late u.s. fall and easing of the brazil drought
Sometimes weak La Nina events or east-based La Nina Modoki can bring major cold weather to U.S. energy areas. However, as I pointed out to Weather Wealth clients the last few weeks, my expectation is not for an east-based La Nina Modoki but a potentially moderate to strong standard La Nina. What does this mean? Rather than the cool ocean temperatures in the equatorial Pacific being close to Peru, the cold waters will be spread out equally. You combine La Nina with the historical drought out west, and my computer program Climate Predict suggests a warm late fall and early winter. This has caused everyone and their dog to “run for the hills” if they were long natural gas on the hot summer and tight stocks.
Stay tuned, however, certain types of stronger La Nina events can in fact bring a cold December or January. So, we do not want you to miss some of the trading opportunities we will have for Weather Wealth clients.
What an average of all la nina events suggest for winter temperatures
Shown below are all La Nina events and the tendency for winter cold to be mainly over parts of Asia, Europe, New England, and much of western Canada. Is this written in stone? Of course not. I am sure there will be some occasional cold periods and trading opportunities in natural gas and heating oil in the months ahead. However, it will be important to monitor what is also happening with Sea Ice over the Arctic, as well as many of the teleconnections (climatic variables) listed in blue, below.
One of my strongest and successful recommendations to Weather Wealth clients, was selling natural gas in early October, based on my warm October and November forecast. However, prices may have fallen too far too quickly, especially with all of winter still ahead of us.
CLIMATE PREDICT PREDICTED THE EASING OF THE BRAZIL AND WESTERN U.S. DROUGHT
While the media has been touting that La Nina conditions might intensify the Brazil drought, it has really been deforestation in the Amazon that was the main culprit of record low water levels from Parana to Sao Paulo. While some La Nina events can bring droughts to northern Brazil, it is usually southern Brazil and Argentina that have dryness between October-January during La Nina events–not northern Brazil
Warm ocean temperatures in the eastern South Atlantic is called the TSA index. The combination of a moderate to strong La Nina and certain weather conditions over Antarctica called a positive AAO index helped us predict the easing in the northern Brazil drought, more than a month ago. Indeed this past week, that has been happening.
Prices for sugar (for example) have begun to reat negatively to the easing Brazil drought, following a major bull market. La Nina could bring crop problems for corn and soybeans later this year or in early 2022
So how do you take advantage of my long-range weather forecast and investing? I invited you to a free issue of CLIMATELLIGENCE:
Why Jim Roemer Predicted A Warm Winter for Natural Gas Prices Last December
One of our most accurate trade ideas this past season was selling natural gas. That warm winter projection was in our forecast for December. WeatherBell, and many other forecast firms, kept touting cold winter models. In my opinion, they also published erroneous theories that low solar activity is more important than a warming planet. I do acknowledge that I had been in the camp for some cold early winter weather in November. However, I quickly changed that view due to various global teleconnections. Here is an article I wrote a few months ago.
Why Did Natural Gas Prices Suddenly Rally in April?
Over the past few weeks, the pandemic spawned worries about global demand for both crude oil and natural gas. This helped to pressure these energy commodities to new lows, a week ago. I recently highlighted an energy opinion in my WEATHER WEALTH weekly commodity weather blog. In that comment, I stated that lower crude and natgas prices could curtail shale production and possibly boost energy prices. The recent $7/barrel rally in crude futures off the $19 spot contract lows wasn’t based on weather. It is more tied to feelings that OPEC and Russia will have a truce in their oil production war. Longer term, once this pandemic ends, crude prices are likely to sustain a more pronounced rally.
Regarding the weather, an early spring Midwest (and Northeast) cold spell in coming weeks created short covering.
The blue trough shown above is creating some excitement in the natgas market, even though winter is practically over. Nevertheless, New England snows and Plains temps in the teens and 20s next week have created some short covering. In addition to natural gas hedgers/speculators, traders in the wheat market will also be focusing in on this.
Temperatures next Tuesday and Wednesday could actually be colder than this possibly falling into the 20s across even southern Kansas. This will interest wheat market participants who will be closely following what transpires.
The Polar Vortex break-off is responsible for two bouts of eastern and Midwest cold I expect in the next fortnight. In part, this is due to the MJO.
The MJO’s cold phase is not the only factor replacing the Polar Vortex to the south. In my opinion, El Nino’s residual effect from last winter, and other teleconnections, caused the near record warm US winter. Now, many of those teleconnections are beginning to change.
What will summer be like? How might you be able to take advantage of the natural gas and grain market? You’ll learn the answers when you sign up for a free trial to my weekly GOLD PLAN blogs.
Those of you who are subscribers have heard me talk about a warm first part of winter for the US for weeks and hence a generally bearish outlook for natural gas prices. Stocks are huge and global weather, not just in Australia has been warmer than normal. Obviously, the situation in Australia is one for the record books and is due to a combination of Climate Change, the positive Indian Dipole and weak El Nino signal. These teleconnections have also affected US weather and has contradicted so many “global warming” deniers who keep pointing to low solar cycles as a reason for a cold winter.
Will things change for US natural gas areas? It all depends on two climatic variables I often look at: 1) Whether the EPO index turns negative (Right now it has been positive). A negative EPO index would build a ridge over Alaska and force cold weather back into the US.
We can see how some models have a negative EPO index heading deeper into January. What is the correlation with the EPO index? Jim Roemer’s unique CLIMATEPREDICT long range weather forecast program (used by many hedge funds, traders and agribusinesses), shows the historical trend and analogs with a negative late January EPO index.
However, at the bottom of this article are my projected analog years that have forecasted any cold US weather being short lived, since early December. This is not bullish for natural gas, even at close to $2.00
2) The MJO: Will it go into a colder phase or stay in a warm phase? History says that when the MJO goes into a strong phase 7-1, that this could make the EPO go negative and cause colder weather. A good definition of the MJO is here. You can see the MJO is trending towards the colder phases.
Finally, every time there has been a short term cold scare by models, it has not lasted due to a lack of US snow cover and also these teleconnections (stars) from our in house program CLIMATE PREDICT. Notice the warm weather that is suggested into early February. This is in contrast to some computer models.
The El Nino signal, global warming and my program (below), illustrate how we have out guessed standard cold computer models, which most meteorologists believe verbatim
BOTTOM LINE—Natural gas prices are likely NOT finished going down and it would not surprise me if any cold is short lived.
I have been discussing weeks for some energy and ski clients, why certain climatological parameters would likely bring warm weather, not only to the main US natural gas and heating oil areas, but also for much of western Europe.
Indeed, we have seen natural gas prices break some 20% over the last few weeks, while heating oil is under pressure versus the rest of the crude complex that has been pumped up by Iran-Iraq-US military tensions.
I still look for feet of snow for many western ski resorts the next 2 weeks or so with places like Whistler, Mt. Hood, Big Sky Montana and Jackson Hole getting into the action. The Lake Tahoe region to Utah will also get at least a couple feet of snow. Very cold temperatures will finally lower freezing levels in British Columbia, which was short changed on snowfall through most of December. The colder temperatures mean much higher snow:water equivalent ratios. Hence, some areas out west could see 3-5 feet of snow the next 2 weeks.
The stars and arrows on CLIMATEPREDICT (above) are the climatological variables that we used to predict the mild, early, eastern winter and cold and story out west. They are a negative AAO index, the positive Indian Dipole, responsible for the fires and extreme heat in Indonesia and particularly Australia, and also a warm NINO34, in which El Nino conditions persist in the western Pacific. While El Nino is weak, this is not something NOAA or many other firms are talking about.
You can see the jet stream pattern from short term weather forecast models. Again, this is something that CLIMATEPREDICT predicted more than a month ago.
The blue region represents cold temperatures. In fact, parts of the Pacific NW and western Canada will be as much as 15-20 degrees below normal, well into Mid January. The NW flow is ideal for snow in Oregon, British Columbia, Idaho, Washington State and places like Jackson Hole; not just for Tahoe to Utah and Colorado, which saw decent December snowfall.
I have received hundreds of requests from around the world for me to start a weekly or monthly long range weather subscription forecast service. This would be “SECOND TO NONE”‘ , given my 35 years experience forecasting for dozens of ski resorts, farmers and some hedge funds and investors. Of course, weather forecasting can be difficult and due to “chaos theory”, “global warming” and “solar activity”, things can change on a dime.
This is why I will be offering such a newsletter in the weeks or months ahead. It will focus on forecasting for many industries from skiing to commodities with some generic trading and investing ideas.
Coming sometime this winter, a new weather newsletter with occasional updates, (WEATHER-WEALTH) So check back frequently for details.
In the meantime, if you email me at email@example.com I would be happy enough to send you my preliminary winter outlook for 2019-2020.
While many weather forecasters try their hand at these long range predictions, I am lucky enough to also incorporate a special program called CLIMATECH, which I developed with an alum from MIT. It uses teleconnections such as El Nino, ocean temperatures thousands of miles away, what is happening over the North and South Poles, etc. to help make predictions.
IN THIS FREE REPORT I WILL SEND YOU:
*Why late November will feature more cold and snow for the Midwest and East and is putting a floor in natural gas prices and heating oil spreads. What may December be like?
*Low solar activity; El Nino Modoki; Stratospheric Warming; Weather Weirdos, CLIMATECH ™ what this means for winter and the energy markets.
Why does the current global climate support a weather situation similar to 1966 sometime in early to mid 2020? A severe 2nd half of winter in the US.
I have received numerous questions around the world from natural gas producers, hedgers, traders and even some pipeline operators, what my official long range weather forecast is for the northern hemisphere winter.
To see a preview of my winter outlook in the next week, please register for free blogs and reports here.Right now, I feel at least the first half of winter will be warmer than normal with a chance that the late winter or spring will be cold. Natural gas prices should come under pressure this winter.
In the meantime, as of this writing (November 12th), some energy traders are baffled as to why natural gas prices have sold off 10% this week, following a stellar early November bull move on extreme US cold. However, prices should be rallying back again soon due to the on going record cold and some suggests of a return to cold late November weather.
The graphic of the Polar Vortex at the top of this page helped create a major short covering rally in natural gas prices a week ago. However, record low sea ice and other climatic factors will be easing the US cold deeper into November and one reason why prices sold off earlier this week. Nevertheless, weather maps still suggest some cold late November weather in the eastern US and the recent cold may inspire a friendly EIA number this week. Hence, without major prolonged warm weather, nat gas prices will remain volatile.
Arctic sea ice is one of the most dramatic indicators of the changing climate. Ice cover on the Arctic Ocean is in some months about half what it was decades ago, and its thickness has shrunk, by some estimates 40 percent.
Natural gas prices will remain volatile. December weather will of course be key.
The record cold (above) earlier this week helped to rally wheat prices (some crop damage in the Plains) and was anticipated a week ago in the natural gas market. -Jim
While there will be some more cold in the eastern US weather and a few bouts of snow could still develop over the next week or two, one can see that natural gas stocks are still well above the 5 year average (chart, below). Hence, for us to sustain a major rally in natural gas prices, we need to see consistent major cold, the polar vortex return by December and for there to be a panic by producers and hedgers.
Heating oil vs gasoline and crude prices will also be influenced by winter weather.
While El Nino does, low solar activity and many other factors will influence winter weather and natural gas and heating oil prices. Sometimes, a warming Arctic can displace the polar vortex and send extreme cold south either in the US, Europe or Asia. This is what is happening early this week.
So what is my winter forecast and will the polar vortex return? I will be offering trading ideas and long range forecasts soon with a paid monthly newsletter subscription and occasional flash weekly updates. Stay tuned for details.–Jim Roemer