Photographer: Gary John Norman/Getty Images

World May Miss La Nina’s Market-Rattling Effects as Odds Dim

  • Harder-to-predict patterns may hold sway over gas, soy markets
  • La Nina has caused floods in coal fields, drought in soy crops

La Nina, a weather phenomenon that could make parts of the U.S. colder, Brazil drier and Australia wetter, boosting prices for natural gas, soybeans and coal, probably won’t come around this year.

The U.S. Climate Prediction Center said Thursday it is dropping its La Nina watch and lowering the odds it will form to 35 to 45 percent from 75 percent in June, according to Michelle L’Heureux, a forecaster with the center in College Park, Maryland. Prospects for La Nina dimmed after models suggested the Pacific has reached its coolest phase for this cycle and will moderate through the rest of 2016. Still, no one is saying La Nina definitely won’t arrive.

“We’re dropping the La Nina watch, but the chance of a La Nina itself is definitely not zero,” L’Heureux said.

Characterized by cooling equatorial Pacific waters, La Ninas often deliver colder winters to the northern U.S., which can trigger higher gas prices by boosting demand for the power plant fuel. The event can also cause flooding in Australia’s coal belt or drought in Brazil’s soybean fields that can cut crop yields. If La Nina fails to arrive, predicting the weather in general becomes more difficult, according to L’Heureux.

It’s been among the hottest U.S. summers in 10 years, yet gas prices have failed to reach $3 per million British thermal units, said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. A mild winter will add to the market’s woes, he said. Gas last reached $3 in May 2015.

“It certainly isn’t going to help the bulls’ case,” Schork said in an interview. “It is sort of like the Sword of Damocles hanging over the gas bulls’ heads.”

Gas Fields

Frigid weather can also shut down production in gas fields, said Teri Viswanath, managing director of natural gas at PIRA Energy Group in New York. A winter without La Nina means more uncertainty and a lower likelihood of cold settling in across the northern U.S.

“The winter season is incredibly influential in setting the trend for the calendar year price,” Viswanath said in an interview. If La Nina fails to develop, “Wow, that doesn’t bode well. Shorter cycle factors will influence the winter ahead, so it is a bit more of a crap shoot.”

La Ninas typically occur every two to seven years when cooler sea surface temperatures trigger a reaction in the atmosphere. When the same area warms, its an El Nino. Forecasters haven’t seen any changes in thunderstorms, winds or ocean temperatures pointing to a La Nina in the last month, according to the center’s monthly update Thursday.

Hard-to-Predict Patterns

When the Pacific is in its normal state, other harder-to-predict patterns set the stage for wetter or drier seasons or temperatures above or below historical norms. In North America, twin patterns known as the Arctic and North Atlantic Oscillations could hold sway over how cold the winter gets and how much gas is burned to heat homes and businesses. If the oscillations turn negative, more cold air will pool over the continent.

In some cases, such weather patterns give forecasters only a few weeks before changes that can dominate North America’s weather move in.

“We like El Nino and La Nina,” L’Heureux said. “It gives us predictability.”

La Ninas can also decrease wind shear across the tropical Atlantic allowing more hurricanes to form. Shear, when winds blow at opposite directions or varying speeds at different altitudes, will often rip apart tropical systems.

Last year’s El Nino was one of the three strongest on record, generating the hottest global temperatures in more than 130 years, according to the U.S. National Centers for Environmental Information in Asheville, North Carolina.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE