El Niño: Spanish for “Bearish Natural Gas!”

By: Matthew Mattingly

Saturday Night Live fans all remember the 90’s Chris Farley sketch on “El Niño.” In the sketch we learned some important El Niño facts, such as the weather pattern brings torrential downfall to the Pacific and limits hurricane activity in the Atlantic. However, more importantly we learned that El Niño translates to “The Nino” in English (well not really) and is no match to the sleeper hold by Rick Flair. You can check out the video here, and relive the greatness of Chris Farley.

2015 brings the return of the El Niño, and it returns with vigor. The El Niño of this winter is considered the strongest since the 1997-1998 occurrence that produced the strongest El Niño of the 20th century. While this season’s El Niño may not surpass the one of 18 years ago, it is expected to be close as it continues to intensify over the winter months and bring warm temperatures with it.

While many of us have heard the term “El Niño,” we might not remember what the weather pattern truly means.  El Niño is the prolong warming in the Pacific Ocean that develops in the central and east-central Equatorial Pacific (off the South American Coast). Due to the warming of the water in this area a new chain of events start with weather patterns that brings more rain to South American, potential for drought conditions to the western Pacific, and a rise in temperatures across the globe. To learn the true mechanics of the El Niño, I recommend watching this video.

temperature-outlook

In regards to the United States specifically, this El Niño means well above normal temperatures. A white Christmas will purely be in dreams as the majority of the country will be in t-shirts this holiday season. And it doesn’t end in December. The temperature map for the next 90 days (listed below) shows the majority of the country (specifically the ones that use natural gas for heat) with “Above” to “Much Above” forecasted temperatures. With the rise in temperatures, it has meant a fall (more like a collapse) in natural gas prices. Currently January and February 2016 NYMEX natural gas is trading below $2.00/MMBtu with no bullish news in sight. As supply continues to remain steady, combined with VERY weak demand this winter, one has to wonder what prices will look like coming out of withdrawal season. One thing is for certain, producers are not happy with pricing now and they are definitely not going to be happy in the next couple of months either.