The mildest U.S. winter since 2000 will end in two weeks with warming temperatures, leaving little chance for a last gasp of heating demand that would bolster natural gas prices.
Temperatures may exceed 70 degrees Fahrenheit (21 Celsius) in parts of the mid-Atlantic and southern Midwest by the time spring officially arrives March 20, said Commodity Weather Group LLC in Bethesda, Maryland. Temperatures may reach 69 in New York tomorrow and 60 in Chicago on March 15, according to AccuWeather Inc. of State College, Pennsylvania.
While there may be brief spells of lower temperatures, the coldest part of the average U.S. winter has passed. The gas market needed cold to help offset weaker demand caused by rising inventories and a slumping economy, said James L. Williams, owner of WTRG Economics in London, Arkansas.
“It’s just out of whack,” Williams said. “The warm winter has clearly exacerbated it. Unless it’s going to be an ugly March, it’s not going to make up for the warm winter. You can’t catch up at this point.”
Gas has fallen 23 percent this year, making it the worst performer on Standard & Poor’s GSCI commodity index. On Feb. 24, inventories of the fuel were 45 percent above the five-year average, compared with 13.7 percent on Dec. 23, according to Energy Department data.
Futures fell to a 10-year low in New York as forecasts for above-average March temperatures signaled reduced demand for the furnace and power plant fuel. Gas for April delivery declined 5.4 cents, or 2.3 percent, to settle at $2.302 per million British thermal units on the New York Mercantile Exchange.
“People are starting to come to the realization that this was the winter that wasn’t,” said Phil Flynn, senior market analyst at PFGBest Research in Chicago.
This winter in the contiguous U.S. was the fourth-warmest on record, with an average temperature of 36.8 degrees Fahrenheit (2.7 Celsius), the National Climatic Data Center reported today.
That made it the warmest since the record winter of 2000, which had an average temperature of 37.17 degrees, the center said. Meteorologists designate winter as being from Dec. 1 to Feb. 29. The calendar start to spring is based on the equinox.
Looking Past March
“March is theoretically the last month of winter but the market is looking beyond,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in Houston. “It’s looking at relatively mild conditions, so lots of excess gas and no place to burn it.”
Viswanath said that at this time of year, a cold snap tends to lack the punch, and therefore the impact on energy markets, that a frigid blast in January can provide.
A day where the temperature falls below normal in Chicago can mean a 1 billion cubic foot swing in inventory in January and half that in March, she said.
“It is a significantly different story that develops in March,” Viswanath said. “So now we’re in the last month and we’re looking into the shoulder season and there is not a lot of support of the gas market.”
The Arctic and North Atlantic oscillations, changes in pressure over the North Pole and the northern Atlantic Ocean, were major contributors to the mild U.S. winter, said Jon Gottschalck, head of forecast operations at the Climate Prediction Center in Camp Springs, Maryland.
Through November, December and the first half of January, the Arctic Oscillation was positive, which meant cold air stayed at the pole, Gottschalck said.
In the second half of January, it flipped to negative and frigid polar air started heading south. Then something unusual happened, he said: The North Atlantic Oscillation remained positive.
Instead of cold Arctic air being trapped in the U.S. to freeze large cities, it kept right on going.
“We’re not sure why,” Gottschalck said. “That’s just the way it worked out this year.”
While damping natural gas prices, the milder winter weather probably was positive for the economy in general, said Thomas J. Teisberg, a weather economist and president of Teisberg Associates in Charlottesville, Virginia. People who saved money on heating bills probably spent it elsewhere, he said.
State and local governments benefited because they didn’t have to spend as much on snow and ice removal, said Jim Koermer, a professor of meteorology at Plymouth State University in New Hampshire. At the same time, ski resorts spent more making snow and many retailers missed out on selling snow shovels, which are a last-minute item, Koermer said.