As reported in Wall Street Journal

Tim Puko

A repeat of last year’s snowy, Arctic-cold winter is looking a little more likely today. Natural gas traders, still scarred by the memory, are bunkering in.

Buyers have been rushing into the gas market for a week on fears of a sequel to last winter’s Polar Vortex, which walloped the eastern half of the U.S. with brutally cold temperatures from the deep south up to New England. Many spent months dismissing that possibility as simple panic, but now meteorologists are getting more pessimistic.

Both Commodity Weather Group and WeatherBELL Analytics LLC released long-term forecasts this week showing a notably higher risk for a cold December. That was supposed to be relatively mild month this winter, balancing out a cold January and February. Now the whole winter is shaping up to be “pretty nasty,” WeatherBELL said.

That has propelled natural gas to a six-session rally. It’s rebounded nearly 18% since it hit its 2014 low last week. Gains of nearly 3% Tuesday are pushing it near a three-month high.

And traders are all wondering if the winter of 2015 will bring a repeat of 2014.

“I think it’s a reasonable risk,” said Matt Rogers president and meteorologist at Commodity Weather Group in Bethesda, Md. An early season burst of cold starting next week is already “really spooking a lot of people.”

More than half of all U.S. homes use natural gas as their heating fuel, making the natural gas market especially vulnerable to weather. Tepid demand had capped the market for four months and had bankers and investors fearing a glut by the spring. The new forecasts have flipped that script, at least temporarily.

Timothy J. Collins, director at Fairfield Advisors LLC in Madison, N.J., has had to get out of spread bets that depended on falling prices in January, he said. He is now trying to buy into positions that would benefit from rising prices that month, but he still thinks that record production will help balance out the fear of a Polar Vortex repeat, he said.

“I think people are overly sensitive to it,” said Mr. Collins, whose fund manages $35 million. “You know how they say the military is always trying to fight the last war? Well, we keep trading the last position.”

The rally could produce bargains for stock investors, said Jonathan Waghorn, co-portfolio manager at Guinness Atkinson Asset Management Inc. in London. Its $84-million fund holds Chesapeake Energy Corp., QEP Resources Inc. and Ultra Petroleum Corp, among other oil and gas producers that could benefit from rising gas prices balancing out free-falling oil prices.

“Gas is strong, yet the energy equities names are all getting hit,” Mr. Waghorn said. “If you believe the gas story, today’s giving you a good opportunity to pick up some energy names getting smashed by weak oil.”

John Bolaris, For
Last updated: Thursday, October 2, 2014,

Signs of significant to major changes should take place across our region as we move through October with periodic chilly shots and increasingly stormy weather.

Two key players we always watch as we head into the winter season are the North Atlantic Oscillation better known simply as NAO and Arctic Oscillation (AO). We monitor both as they play a very important role in forecasting storm and cold cycles.

I won’t get meteorological-crazy on you, so I will keep it simple. When the NAO is in the negative phase, it’s usually a precursor for increasing storm chances for the Northeast. During the winter season I use this phrase, “When NAO is negative, think snow; when positive, less snow.”

Right now, forecasting models are indicating that NAO is going sharply negative for the month of October, especially by mid-October. But since it’s extremely rare to get snow in October, we are looking for more in the way of storms – not snow. Although I would not be surprised if the first wet flakes of the season fall in the Poconos sometime in mid- to late October.

The same can be said for the Arctic oscillation. When snow cover builds across the Northwest territories of Canada it creates high pressure, better known as Arctic air masses. This leads to a better chance of below-normal temperatures invading the Northeast. AO is also divided into positive and negative phases, as is North Atlantic Oscillation.

Negative phase with AO also leads to the better chances of cold and snow in the Northeast. During extreme negative phases, NAO and AO led to record snows in the past. The winter of 2009-10 was the snowiest winter of all-time in Philly with an incredible 78.7 inches; it was mainly attributed to record-setting negative AO and strongly negative NAO.

For this weekend, a strong cold front will produce a band of rain and perhaps scattered storms for Saturday morning into the early afternoon, followed by a chilly pop Saturday night (Poconos will drop into the 30s). Sunday will see a cool wind.

Look for a stormy period between Oct. 13-15, followed by a chilly blast with the first possible frost of the season.

My long-range winter outlook for 2014-15 comes out right around Oct. 31, so stay tuned.


Our Perspective:

The energy market is waiting with baited breath on the long term winter forecast. After surviving the hurricane season all eyes are looking to see how cold it may be this winter. This may be the first sign.