Winter temperatures are important when analyzing the impact to New England power and natural gas prices. This is due to physical gas infrastructure in the region. Most of the gas in the region is sourced from the Pennsylvania/Ohio region. However, because of bottlenecks in the pipeline, there could be a shortage or a drastic supply/demand imbalance when heating demand picks up during the cold winter months. That is why when surveying the market for potential opportunities in purchasing power and gas in New England, you should include winter temperature outlooks in your analysis.
The U.S. saw its second warmest and warmest winters since 1950 last winter and during the 2015-2016 winter, respectively. It was by no coincidence that we saw an El Nino pattern present during both periods. This year we have seen some signs that a La Nina pattern may emerge during the winter months. We’ll look at what that means for the country and specifically, New England.
El Nino/La Nina
An El Nino pattern is recognized when the sea surface temperature in the Equatorial Pacific Ocean (see Exhibit 1) reaches 0.5 degrees Celsius or above the 3-month average. El Nino means The Little Boy in Spanish and was recognized by fishermen off the west coast of South America in the 1600s. They noticed the warm water temperatures phenomenon around the December period and that’s where the name originated. A La Nina is just the inverse of El Nino – the sea surface temps in the same oceanic region reaches 0.5 degrees Celsius or below the 3-month average.
The latest temperature reading for the Equatorial Pacific Ocean region is at 0.1 degrees Celsius below average, making the pattern neutral. This comes after we saw September temperatures hit the threshold of 0.5 degrees Celsius below average. Despite the neutral reading, the National Weather Service still predicts with 55-60% certainty that La Nina conditions will be present through the winter.
Typical La Nina winters are characterized as a variable polar jet stream that often ambles from the North Pacific down through the Pacific Northwest, across the Northern Plains and bends up through the Northeast and New England (see Exhibit 2). Regions north of the jet stream see colder risks while the South may see warmer risks. Areas in the jet stream, such as New England, can typically experience volatile weather.
Although there is no certainty La Nina conditions will emerge, most winter outlooks appear to be factoring in at least a small part of the pattern; one in particular being the National Weather Service. In their winter forecast (see Exhibit 3), it appears they are predicting a kind of La Nina “light” pattern where the nation is split in two by the polar jet stream, but with a definite warmer-leaning bias. In the outlook, only a small region in the extreme north/northwest of the Lower 48 will see colder-than-average temperatures with warmer-than-average temperatures for the southern tier and East Coast ─ most notably New England.
Other weather factors outside of the La Nina pattern, such as snow cover, oscillations and blocking can change the pattern if La Nina conditions do emerge. Arctic Blocking is one of the bigger risks to overriding the La Nina configuration. Blocking is the changing of a jet stream that would bring some cold Arctic air to the Midwest and Eastern half of the U.S. This can come on quickly without much notice and negate any strong La Nina impacts that could dominate headlines as winter approaches. Current risks and indications for Artic Blocking are low, but as mentioned, this could change quickly.
If you’re interested in learning more, register for our next Energy Market Intel Webinar on Wednesday, December 13th to hear from our energy professionals about a weather summary, fundamentals overview and pipeline infrastructure update.