March 27, 2023

March 23, 2023

Warmest Winter on Record Delivers Billions in Profits to Citadel

Dr. Ray Schmitt



min read

Image source: ShutterStock

The meteorological winter of December, January and February has just ended as one of the warmest on record for much of the US and Europe. The Northeast was particularly warm, with nearly the whole region averaging 4 to 6 degrees Fahrenheit above normal (Figure 1).  

winter tdpt map
Figure 1: The average daily temperature in the US Northeast was 4 to 6 degrees Fahrenheit above normal this winter. Source: Applied Climate Information System (ACIS)
UMass Amherst released a report on March 1 that said southern New England experienced a top 5...
Figure 2: December 2022 thru February 2023 was one of the warmest winters on record. Source: Applied Climate Information System (ACIS)

Many cities experienced their warmest winter on record or in the top five (Figure 2).  Most had little or no snow at all. Canada was also exceptionally warm; the Rideau Canal Skateway in Ottawa was unable to open at all this year for the first time since its establishment in 1971.  Europe has also experienced a very warm winter, with the lack of snow impacting many ski resorts and an accompanying drought creating problems for hydropower generation and river transport.  One positive note, it did spare Europe from an energy crisis due to the cut-off of Russian natural gas supplies as a consequence of the war in Ukraine.  

With an exceptionally warm winter playing out in both the US and Europe, natural gas prices have plummeted in the face of weak demand.  Figure 3 shows the price over the last 12 months.

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Figure 3.  Natural gas prices for the last year in $/MMBtu.  The rise in prices coincides with the start of the Russian invasion of Ukraine and peaks at over $9/MMBtu in August 2022.  Source:

While the runup in natural gas prices was partly due to international political issues like the European boycott of Russian gas and increased competition between the US Northeast and Europe for Liquified Natural Gas from the Gulf of Mexico, the weather plays a significant role.  At Salient we produce reliable forecasts of temperatures months in advance.  Our blog on the winter outlook for the US and Europe, published in October last year, forecast well above average temperatures for the winter in both the US and Europe. The forecast has played out well, and the consequences for natural gas prices are clearly significant, as demand was much less than anticipated. A fall price of ~$7/MMBtu dropped to $2.173 on February 20, 2023.  A trader who had shorted natural gas based on our forecast could have made out very well indeed! And prior to the October blog the warm winter forecast was announced to the Northeast Energy and Commerce Association Fuels Conference on September 29, 2022. But a warm winter for both the US and Europe was very apparent to us even earlier (Figure 4).

Figure 4. Temperature anomalies for December, January and February as forecast by Salient on August 15, 2022. Well above average winter temperatures for both the US and Europe were clear, indicating much less demand for natural gas.

While hindsight is 20-20, it’s interesting to realize that an even greater profit could have been realized in natural gas futures by acting on our August forecast, when prices were over $9/MMBtu.  Indeed, it seems that the hedge fund Citadel did just that to claim record profits this year, using its sophisticated weather team to make big bets on natural gas. 

The challenge is that most businesses don’t have weather forecasting infrastructure in place. Contact Salient to learn more about how our novel long-range forecasts can help you make weather-related decisions in time to matter.


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