UNIVERSITY PARK, Pa. — Weather is an important factor that energy investors consider when making trades. Through an internship with Hudson Ridge Asset Management, Kerry Mindiak, a senior studying meteorology in the College of Earth and Mineral Sciences (EMS) at Penn State, spent her summer providing the company with the crucial weather edge it needs in a competitive market.
Located in the financial district of New York, Hudson Ridge deploys a team of seasoned energy market and trading professionals who manage investment portfolios in natural gas.
Through her involvement with Penn State’s Weather Risk Club, Mindiak learned that the company, which does not have a meteorologist on staff, was seeking an intern with a meteorological background.
“The opportunity at Hudson Ridge sounded perfect for me, especially given that I’m in the weather risk management option in meteorology,” said Mindiak, who is also pursuing a minor in energy business and finance.
A day on Wall Street
Mindiak started each day by examining daily weather models, paying close attention to variables like temperature and precipitation. She then used this information to create meteorological forecasts for 6-10 and 11-15 days out in the future. These forecasts served as an additional resource to the models that Hudson Ridge already used.
“Hudson Ridge already has forecasts provided to them by other weather vendors,” she said, “but they wanted me to provide additional forecasts to help reduce the uncertainty for their investors.”
These forecasts, specifically those for temperature, are especially important for natural gas markets because of the major role temperature plays in the demand for natural gas. Primarily used for residential and commercial heating and cooling, natural gas also has uses in power generation and industry.
During the summer, Hudson Ridge was specifically concerned with the number of cooling degree days (CDD), which measures the difference between the average temperature in a day and a baseline temperature of 65 degrees.
These values were critical for determining how high natural gas demand would be in certain regions during the summer months.
“The CDD measurements are important when you’re comparing population-dense places like New York as opposed to a more sparsely populated place like Montana, for example,” Mindiak said. “An increase in CDD in New York would equate to an exponentially higher demand for natural gas than the same increase in Montana.”
Applying her meteorology courses to real-life scenarios
During her internship, Mindiak applied forecasting skills that she acquired in METEO 411: Synoptic Meteorology. Synoptic meteorology examines large-scale weather systems, fronts and jet streams to provide a big-picture look at the atmosphere.
“I looked at large-scale forecasts at Hudson Ridge, so the big weather patterns that we studied were very useful,” she said.
She also credits METEO 460: Weather Risk and Financial Markets, a capstone course that students in the Weather Risk Management option take during their final year, with improving her ability to communicate her forecasts with her colleagues. The course is taught by David Titley, Rear Admiral (Ret.), professor of international affairs and of practice in the Department of Meteorology and Atmospheric Science, and founding director of Penn State’s Center for Solutions to Weather and Climate Risk.
Mindiak also works for Titley as a researcher, where she assists in preparing laboratory exercises for METEO 460, researching and developing natural gas demand forecasts and managing the social media presence of the Center for Solutions to Weather and Climate Risk.
“Dr. Titley, both through the capstone course and through his research that I’m involved with, has helped me learn how to communicate my weather forecasts in a language that can be understood by people who don’t have meteorology backgrounds,” she said.
Looking toward the future
Mindiak says that her experiences at Hudson Ridge have been beneficial in her fall 2016 courses. She emphasized the need to maintain discipline in the impulsive world of Wall Street.
“I was able to watch the investors observe changes in natural gas demand and see how they reacted to it, and this taught me to be level-headed in energy markets,” she said. “This is has really helped me in my energy and business finance courses.”
Mindiak plans to graduate at the end of the semester, and she hopes to land a position similar to the one she held at Hudson Ridge.