WSI Calls for Cold Winter in Eastern US, Especially After New Year

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WSI and ESAI say below-normal temperatures in key demand areas will boost natural gas demand and firm prices in November and January.

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Recent changes in Pacific Ocean temperatures along with other factors, such as reduced solar flux, have combined to produce a favorable environment for a cold winter in the eastern US this year

WSI expects the upcoming period (November-January) to average cooler than normal in the eastern and south-central US, with above-normal temperatures common across the western and north-central US. The WSI winter forecast (December-February) shows below-normal temperatures across the eastern and southern US, with above-normal temperatures across the northwestern half of the country. The WSI seasonal outlooks reference a standard 30-year normal (1971-2000).

"Recent changes in Pacific Ocean temperatures along with other factors, such as reduced solar flux, have combined to produce a favorable environment for a cold winter in the eastern US this year" said WSI seasonal forecaster Dr. Todd Crawford. "Confidence in the cold winter forecast will increase further if snow cover builds rapidly at higher latitudes during October. Our current forecast indicates a relatively benign start to winter, followed by a rather active and cold January and February."

In November, WSI predicts regional temperature anomalies as follows:
Northeast     - Colder than normal
Southeast     - Colder than normal
N Central     - Colder than normal
S Central     - Colder than normal
Northwest     - Warmer than normal
Southwest     - Warmer than normal

According to Chris Kostas of ESAI, "WSI's November forecast of cooler-than-normal temperatures east of the Rockies and much colder-than-normal temperatures in the South should give rise to an early boost in aggregate heating demand. The above-normal temperatures in the Northwest and Southwest will reduce heating demand in those regions, but not nearly enough to offset the effects of the colder-than-normal Consuming East and Producing regions. Inventories are expected to exceed the levels seen last year (and the 5-year average) by about 400 Bcf, creating a more than adequate cushion to buffer the increased seasonal demand of November. Despite ample supplies, cash prices are likely to firm modestly in November on the above-normal seasonal demand and the transition into the heating season."

In December, WSI sees the monthly breakdown as:
Northeast     - Warmer than normal
Southeast     - Colder than normal
N Central     - Warmer than normal
S Central     - Colder than normal
Northwest     - Colder than normal
Southwest     - Colder than normal

"The WSI December forecast shows a marked shift to warmer than normal temperatures in the Consuming East with much warmer-than-normal temperatures centered in the Great Lakes region. This will temper the effects of a colder-than-normal South and West. In fact, lower electrical loads due to the weather will combine with the effects of slack industrial demand, and increased supply from the REX-East pipeline (which is expected to be transporting as much as 1.8 Bcf/day from the Rockies to Ohio beginning sometime in November). This will likely displace supply from Henry Hub and temper the effects of the colder than normal temperatures that are expected in the South," said Chris Kostas. "Delivered gas prices in the West should firm as temperatures in the region swing from above-normal in November to below-normal in December."

In January, WSI forecasts:
Northeast     - Colder than normal
Southeast     - Colder than normal
N Central     - Warmer than normal
S Central     - Colder than normal
Northwest     - Warmer than normal
Southwest     - Warmer than normal

"For January, WSI is forecasting colder-than-normal temperatures east of the Mississippi, as well as for Texas and the South Central portion of the country. This represents a large shift for the Consuming East, which is expecting to enjoy a mild December. January will be the second month in row of colder-than-normal temperatures in the South. Despite record natural gas inventories entering the winter, the expected colder-than-normal January in the Consuming East and the Producing Region could push the supply picture back into balance for 2010. In addition, with natural gas trading at a significant discount to fuel oil, natural gas basis pricing will need to be very high before fuel-switching for power generation kicks in. The effect of this large spread increases local gas demand (particularly in the Northeast) and will support delivered gas prices. Northeast basis pricing could get lofty during cold snaps in January, though for shorter periods of time than in the past due to ample inventories this year and the expected completion of the REX-East pipeline in November," according to Chris Kostas. "In the West, warmer-than-normal temperatures should keep January regional gas and power prices subdued."

WSI, which provides customized weather information to energy traders, will issue its next seasonal outlook (for the December-March period) on November 24.

About WSI
WSI Corporation is the world's leading provider of weather-driven business solutions for professionals in the energy, agriculture, insurance, aviation, and media markets, and multiple federal and state government agencies. WSI is a member of The Weather Channel Companies and is headquartered in Andover, Massachusetts with offices in Birmingham, England. The Weather Channel Companies are owned by a consortium made up of NBC Universal and the private equity firms The Blackstone Group and Bain Capital. More information about WSI can be found at http://www.wsi.com.
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About ESAI
Since its inception in 1984, Energy Security Analysis Inc. (ESAI) has been dedicated to monitoring, analyzing, and synthesizing information about world-wide energy markets. Tapping the talents of its senior-level staff, ESAI provides clients with unparalleled insight into where the markets have been and where they are headed. ESAI provides ongoing systematic analysis of energy prices in the oil, natural gas, and energy markets. For more information on ESAI services, see http://www.esai.com.

Contacts:
Kristen Sullivan    
Weather Services International     
(978) 983-6607    
ksullivan(at)wsi.com    

Tommy Sutro
ESAI, Energy Security Analysis, Inc.
(781) 245-2036
tsutro(at)esai.com

Editorial Contact:
Barbara Rudolph    
Rudolph Communications, LLC
(781) 229-1811
bjr(at)rudolphcommunications.com

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