Two Cents on El Niño
October 09, 2023
El Niño and La Niña make headlines but do they move markets? The weather patterns represent opposite extremes in the El Niño/Southern Oscillation (ENSO). The ENSO cycle refers to the sometimes very strong year-to-year variations in sea-surface temperatures, rainfall, surface air pressure, and atmospheric circulation that occur across the equatorial Pacific Ocean.
El Niño refers to the above-average sea-surface temperatures that periodically develop across the east-central equatorial Pacific (the warm phase of the ENSO cycle), and La Niña refers to the periodic cooling of sea-surface temperatures across the same area (cold phase of the ENSO cycle).
There have been 30 El Niño events since 1900, with most occurring after 2000. The Henry Hub natural gas spot prices in non-El Niño winters since 1997 have averaged $4.40/mmbtu. The average for El Niño winters since 1997 is $4.42/mmbtu.