by Jim Roemer | Apr 5, 2017 | Commodities, Energy, Forecast, Weather
Debbie affecting Coal; other energy
Cyclone Debbie damaged coal rails in NE Australia, thus increasing prices across Asia. Debbie may have impacted other energy commodities as well, such as natural gas and oil. However, Jim Roemer says that “The coal industry is a dying industry in the energy sector. This move is probably only short-term.” Check out his latest article on Seeking Alpha: https://seekingalpha.com/article/4060449-california-going-nuts-coal-prices-soar-debbie-natural-gas-commodities
See the Reuters article below for details on Debbie’s impact in Australia.
“Damage to rail lines in cyclone-hit northeast Australia is set to disrupt exports of the steel-making material from the world’s largest coking coal region, underpinning prices and raising the prospect of major producers declaring force majeure. The extent of the damage, which will hit coal mines operated by BHP Billiton Ltd and Glencore PLC, was revealed in the wake of deadly Cyclone Debbie, which struck last week and left a disaster zone stretching 1,000 km (600 miles). Four people have died in floods in Queensland and New South Wales states, with another three missing.
Coal hauler Aurizon Holdings said on Monday it would take up to five weeks to repair parts of its network of rail lines that connects mines to ports in Queensland, with alternative routes being considered for coal transported on the worst-affected Goonyella line. Queensland accounts for more than 50 percent of global seaborne coking coal supplies, with Goonyella alone transporting more than half of the state’s coal – mostly coking coal, used for steel making.”
Read more of this article on Reuters: http://www.reuters.com/article/us-australia-cyclone-coal-idUSKBN1750BZ
(Reporting by Jamie Freed and Tom Westbrook in SYDNEY. Additional reporting by Melanie Burton in MELBOURNE and Henning Gloystein in SINGAPORE. Writing by Jonathan Barrett; Editing by Richard Pullin)
by Jim Roemer | Mar 29, 2017 | Climate, Climatech, Climatelligence, Forecast, Global Warming, Weather
The floods in Peru will continue in a series of historical events. Most global commodity regions around the world have escaped the severe weather. If rains were to move further south into the Chilean Copper Mines (desert region), this would be significant for copper prices. Right now, it is not an issue, however.
The situation in Peru is destroying thousands of years of their rich heritage. Click to the left (blue)
Our unique, long range forecast program CLIMATECH, predicted this flooding as early as last January. Below, you will see the global rainfall forecast from early January. More heavy rains are on the way. The forecast it made 2 months ago, used the warm Atlantic (AMO) and warming at Nino 1+2 off the coast of Peru, as El Nino conditions are slowly evolving.
by Jim Roemer | Mar 15, 2017 | Commodities, Energy, Forecast
The Northeast is digging out from a historic snowstorm. Interior New England bore the brunt of the snow, with Scranton, PA, Albany, NY and Burlington, VT all receiving 15-25+ inches of snow. Spring breakers who chose a ski resort like Smuggler’s Notch over Panama City Beach are certainly happy with their decision. They will be enjoying some fresh snow on the mountain while their friends shiver on the beach with temperatures forecasted to dip into the 30s tomorrow! More snow is on the way for northern New England starting early Saturday morning. Check out the forecast map below:
Heating Oil
Heating oil declined over the past few days, in spite of these snowstorms. The chart below shows the April heating oil contract since February 21st.
A rise in the demand of heating oil can occur during major East Coast snowstorms. This arises from the fact that 88% of U.S residential heating oil is consumed in New England (Source: EIA, 2014). People are stuck at home during cold snowy days, increasing heating needs. However, a monthly report that OPEC released yesterday revealed Saudi Arabia oil production rose back above 10 million barrels/day for February 2017. Heating oil has been falling over past few weeks. Market confidence is waning in the agreement between major producers to lower output.
Heating Oil Spreads
Heating oil spreads, like heating oil-crude and gasoline-heating oil can also be impacted by storms. Heating oil is used in planes, with 7500 canceled flights (earlier this week) leading to lower demand. Similar consequences occur with gasoline, as significantly less cars travel on the road. However, impacts are not always reflected in the prices, with gas-heating oil spread decreasing despite a warm overall winter this year. It is possible that further colder weather will cause heating oil to out perform gasoline in the coming weeks. These energy spreads are another interesting way weather may impact commodity prices.
by Jim Roemer | Mar 6, 2017 | Energy, Forecast, Skiing
(Map Above) CLIMATECH AND MARCH TEMPS WITH A NEGATIVE WPO INDEX NORTHWEST OF ALASKA AND OVER NORTHEAST EURASIA. Normally this should suggest a colder March, but due to a developing El Nino, melting global sea ice and a warming planet, any sustained cold has not been the rule this winter. Natural gas prices have rallied at times even when March and April have been warm.
The -AO and -WPO on the front page, from our program, Climatech, suggests a possible big Nor’easter around the 14th, as well as snows this Friday.
For the first time in weeks, we see the Arctic Oscillation go negative. This offers some colder risks and snow for the upper Midwest and the Northeast into mid- March and offers a potential bottom in the natural gas market and some treacherous driving conditions for parts of the Northeast, especially after the 14th As the map below shows, some places in the Northeast could see more than 10-15″ of snow. Some ski resorts will benefit from late season snows in Vermont, New Hampshire, Maine and upstate New York, which have seen a warm winter and freeze-thawing lately.
Total snowfall next 2 weeks
SNOWFALL PROJECTIONS (above). Ensemble maps from WSI
Arctic Oscillation index has been positive most winter, but you can see it heading slightly negative for the first time in weeks. The main impetus for the colder weather has to do with a weather feature, thousands of miles away over Northeast Asia. (negative WPO index–map below). Notice the colder mid-late March forecast (blue). Nevertheless, the warm Atlantic and a developing east-based El Nino have resulted in a warm winter pressuring natural gas prices and various natural gas equities. However, given colder weather and snows into mid-March, the natural gas market has built into much of the winter bearishness.
by Jim Roemer | Mar 1, 2017 | Climatelligence, Commodities, Forecast, Strategy, Weather
A warming climate, brought on by a developing east based El Nino (very unusual after a strong El Nino 2 years ago), deforestation in NE Brazil and global warming, all point to some unusual weather events for global commodities in the months ahead. We will have more of a discussion about El Nino, next week.
One thing that traders will begin watching is the developing drought in the western Plains wheat areas. While a bit early to cry wolf, it will be important soon that consistent rains fall in this region.
Forecasts for these and other commodities, I can only furnish to my privileged client. (see top feature drought monitor map)
In an interesting article in the NY Times recently, please read about deforestation issues that are only growing worse in Brazil.
NY Times–Deforestation
by Jim Roemer | Feb 28, 2017 | Climate, Commodities, Forecast, Strategy, Weather
Why The Record Warm Winter Fooled Most Forecasters, Commodities And The End Of The California Drought
This article was written by Jim Roemer on February 23 about why weather is a neutral or bearish influence on many commodities.
Feb. 23, 2017 AR, BAL, BNO, BOIL, CANE, COG, DBE, DBO, JO DCNG, DGAZ, DNO, DTO, DWT, FUE, GAZ, GLD, GRN, JJE, KOLD, NIB, OIL, OILK, OILX, OLEM, OLO, ONG, PSX, RJN, SCO, SOYB, SZO, UBN, UCO, UGA, UGAZ, UHN, UNG, UNL, USL, USO, WEAT (SOME ETF’S AND STOCKS AFFECTED BY WEATHER, MANY OF THEM BEARISH)
James Roemer
James RoemerFollow(753 followers)
Hedge fund analyst, commodities, natural resources
Summary
Warm Atlantic; weak El Nino signal; +QBO and another warm U.S. winter for natural gas.
Flooding in California; great skiing out West and no Argentina soybean drought suggest El Nino.
The Bloomberg Commodity Index is up, but not because of the weather.
The Record Breaking Warm U.S. Winter and End to California Drought
Historical floods in California; 110 degree heat in Australia; improving crop prospects for Argentina soybeans and the warmest February in history for the U.S. pressuring natural gas 25% the last month. These are all tell-tale signs that El Nino, not La Nina has driven global weather. El Nino, never really completely went away. You can see how we have been forecasting the best ski season in many years for the west and the end of the California drought for months, here.
Almost every weather forecaster called for a cold U.S. winter this year and this cannot be and further from the truth – the exact opposite. While we can at least partly blame this challenging winter forecast on global warming, the warm Atlantic ocean (+AMO) and a record breaking positive quasi-biennial oscillation (QBO) are equally to blame. A positive QBO has to do with stratospheric winds more than 20 miles above the earth. A positive value means winds blow west to east and can often prevent any sustained blocking over the N. Pole that would normally force down cold weather. These factors have all created a mini-snow drought over the Midwest.
Climatech
Our sophisticated long range forecast program Climatech – above – shows the incredible February global warmth.
Spring Weather Hints at Cooler Weather and Wet, Snowy. What about Natural Gas?
There are some indications from our program that a cooler-than-normal spring would occur. If so, then natural gas prices (NYSEARCA:UNG) could find a bottom, otherwise, we have been bearish for clients the last few weeks. It’s probably a bit late to take advantage of the recent down move in prices. However, if El Nino does form, the odds of a normal to cool summer could ensue and the hurricane season feeble again. That does not bode well for natural gas in the longer term picture. The triple inverse natural gas ETF (NYSEARCA:DGAZ) is up nearly 70% on the warm February.
So which March-April periods had major rallies in natural gas on cold weather? 1999; 2002 and especially 2013 in which prices rallied more than 50% from the February lows on the coldest spring on record. The atmosphere is quite different presently than it was back then.
When one looks at the natural gas equity sector, it is no wonder that stocks such as Cabot Oil & Gas (NYSE:COG); Antero Resources Corp. (NYSE:AR); and Phillips 66 (NYSE:PSX) have greatly lagged the S&P 500. Phillips 66 is among the largest players in the energy sector and natural gas is a significant part of its operation. So weather patterns have a huge influence on profits.
Bloomberg Commodity Index Up Over A Year Ago, But Not Because of Weather (top of the page GRAPHIC)
The big movers in the commodity sector of late have been gold (NYSEARCA:GLD), cotton (NYSEARCA:BAL) and the crude oil (NYSEARCA:OIL) market. The crude oil market is reacting positively to a stronger stock market and OPEC’s push for full compliance with oil cuts. Gold has surprised many traders rallying in the face of expected interest rate rises. However, much of the rally, I believe, is due to continued uncertainty over the Trump presidency as well as technical indicators and inflationary fears. Cotton too, for now, has nothing to do with the weather. The 110 degree in Australia (#9 cotton producer in the world), is probably not a factor due to ample irrigation.
If you want to hear a recent Bloomberg interview of mine with respect to how weather is affecting certain commodities, please listen here.
In the meantime, we have been bearish the Soybean market (NYSEARCA:SOYB) due to a huge crop coming out of South American and generally ideal weather. The spike back to $10.80 a month or so ago in prices was due to flooding and planting delays in Argentina. The odds of a drought this summer in the Midwest is probably unlikely given the chances for a weak El Nino.
Cocoa prices (NYSEARCA:NIB) have taken it on the chin for months on a rebound in global cocoa production we discussed eight months ago. Seasonally, demand kicks in this time of the year and prices often stage a spring rally. If the waters stay warm south of West Africa and in the Indian Ocean, this would offset any chance that a weak El Nino would have in causing crop problems this spring and summer.
Sugar prices (NYSEARCA:CANE) continue to be strong on worries that an Indian sugar crop of only 22.5 million tons this year would require India to import sugar. Back to back years of a global sugar deficit, brought on by the strong El Nino two years ago has been partly responsible for the move up. If El Nino does not officially form, given that Thailand’s drought is not over and the potential exists for a rebound in production later this year, sugar is another commodity whose upside may also be limited.
After my bullish attitude in coffee a month or so ago on global problems with Robusta coffee (instant coffee grown in Vietnam, Indonesia and NE Brazil), the warm global winter may cause a reduction in coffee demand (NYSEARCA:JO). Also, the heavy spec long position and good crops out of Central America and Colombia may also cause a bearish spin in this market shortly.
The U.S. wheat crop (NYSEARCA:WEAT) usually does well after very warm winters and weak El Nino’s. A potential spring freeze scare could develop in a couple months, but unless crops are hurt by a dry spring either in the U.S., Russia and Europe, the long-term bear market may continue.
The key point to all of this is that the weather has not and may continue to keep a lid on many commodities. Given the demise of the California drought and record new snowpack in some areas, it is also possible a year or so from now, prices for vegetables, almonds, etc. (which have seen such a price strike from five years of California drought) could come down which would be good news for the American consumer. It’s the non-weather related commodities that continue to shine.
One potential weather problem might be a cool wet spring that could limit plantings of some crops like corn and cotton if this was to happen and possibly cause a reaction in the market later this spring.
Jim Roemer, bestweatherinc.com
