A meteorological clash of nations is confounding the world’s commodity markets. Global weather agencies can’t agree on whether to expect a La Nina event in coming months. The U.S. has backed off its prediction, Australia remains watchful, while Japan has decided La Nina is already here. Disagreements arise because each nation has different standards for measuring the weather.
The ocean-cooling phenomenon — a shift from last year’s warming El Nino — can roil commodities markets with dramatic shifts in weather that wreak havoc on demand and supplies. The yes-no-maybe confusion is giving heartburn to natural gas, coal and agricultural traders who depend on forecasts to place bets on whether prices will rise or fall.
“There are billions of dollars of capital at stake,” said Teri Viswanath, managing director of natural gas at PIRA Energy Group in New York.
Gas traders are already banking on a La Nina to help deliver the frostiest U.S. winter since the “polar vortex,” a chill that sent prices surging across the U.S. in 2014. And Australia’s coal is headed for the first annual gain in six years, in part on speculation that a La Nina will curb supplies. The last La Nina flooded coal mines in Indonesia and Australia, the world’s two largest exporters of the fuel.
La Nina is just one phase in a larger three-part cycle known as the El Nino Southern Oscillation, or ENSO for short. La Nina represents the cool phase, El Nino is when the equatorial Pacific warms, and ENSO Neutral is in-between.
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