Sunday, December 10, 2006

Let it snow, let it snow, let it snow..

A follow up on Chesapeake Energy's predictions for winter: Two Resources for Energy Insights.


Watch the Weather

One of the more important variables in predicting energy-commodity prices in the month of December is weather. Winter officially begins the middle of the month, and bone-chilling cold is bullish for the energy markets. In fact, last year's historically warm winter was the primary cause of the swoon in natural gas prices this past summer.

Hence, all energy investors have at least one eye on the forecasts, especially the longer-range forecasts for January and February. So I decided to check in with Chesapeake Energy (CHK - commentary - Cramer's Take - Rating), the large natural gas producer, which has its own uncannily accurate meteorologists. Cheapeake's meteorologists were some of the few who accurately predicted last winter's warmth.

The accuracy continues. My sources suggest Chesapeake's forecasters were spot-on in predicting last week's cold-and-snow snap through the upper Midwest. The Chesapeake gang's forecast for the coming week suggests slightly warmer-than-normal temperatures, followed by a holiday cold snap that, if it happens, could help rally energy prices.

More important, the Chesapeake weather team sees a more normal winter season come 2007, compared with the past 30 years. That means that, when compared with the last 10 years (which have been consistently warmer than longer-term norms), winter weather should be colder than normal, a positive for energy investors.

You can keep an informal eye on the weather via these links.