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La Niña transitions to neutral; NOAA sees above-average readings for much of US

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La Niña transitions to neutral; NOAA sees above-average readings for much of US

The current La Niña conditions are expected to remain neutral through the fall and have a less-than-50% chance of transitioning to El Niño by the late fall or early winter 2019, according to the National Oceanic and Atmospheric Administration's latest outlook issued in May.

Marked by cooler sea-surface temperatures in the equatorial Pacific Ocean, La Niña is the counterpart to El Niño and typically brings more supportive fundamentals for U.S. natural gas and electricity markets, including a higher probability of colder winters, hotter summers and increased tropical activity in the Atlantic Basin.

"We believe that investors should be aware of [El Niño-Southern Oscillation]'s cyclical effects and their relation to earnings and potential stock prices. NOAA's forecast suggests that ENSO could remain an unusual influence on energy demand for some time," according to a May 10 research report from Williams Capital Group.

"Now that winter is over, it is time to start looking at the potential for warmer than normal temperatures if they continue into spring/summer as they did in the aftermath of the weak 2017 La Niña," the Williams Capital research note said.

For July through September, the NOAA is projecting warmer-than-normal conditions across much of the country, with the exception of a good portion of the Midwest, which has equal chances of temperatures below, average and above normal.

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