WSI: Winter Temperatures to Finally Arrive after Mild Start

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Below-Normal Temperatures Expected to be Generally Confined to Northern US for Remainder of Winter

WSI US Weather Outlook Jan. - Mar. 2013

WSI US Weather Outlook Jan. - Mar. 2013

After another unusually warm December across much of the US, the pattern is now transitioning to a more normal winter look.

WSI (Weather Services International) expects the January-March period to be colder than normal across much of the northern half of the US. Above-normal temperatures will be common across the southern US, especially in the Southwest. The WSI seasonal outlooks reference a standard 30-year normal (1981-2010).

“After another unusually warm December across much of the US, the pattern is now transitioning to a more normal winter look,” said Dr. Todd Crawford WSI Chief Meteorologist. “An atmospheric blocking event is developing at very high latitudes north of Alaska which will allow for very cold air to move southward into southern Canada and parts of the northern US. However, the southward extent of the cold air will be limited, as a very strong westerly subtropical jet stream will keep parts of the southern US quite mild. By February, we expect an increased cold risk (in both spatial extent and magnitude), as the evolution of the Madden-Julian Oscillation will likely be more favorable for sustained cold. Further, there are indications that the stratospheric polar vortex will weaken considerably during January. This typically results in a pattern change towards colder temperatures across many mid-latitude population centers throughout the Northern Hemisphere. By March, the impacts from the multi-year drought across the Plains will likely favor an early emergence of spring across much of the central and eastern US.”

In January, WSI sees the monthly breakdown as:

  • Northeast*     – Colder than normal, except northern New England
  • Southeast*     – Warmer than normal
  • N Central *    – Colder than normal
  • S Central*     – Warmer than normal
  • Northwest*     – Colder than normal
  • Southwest*     – Warmer than normal

According to Chris Kostas, Senior Power and Gas Analyst at ESAI, “January heating demand is expected to run below normal in the southern two-thirds of the country, while slightly colder-than-normal temperatures will boost heating demand along the northern tier. The cooler northern temperatures and above-normal heating demand in the North Central and Northeast regions should partially offset the reduced demand of the South. While natural gas prices are likely to firm during the coldest periods, robust supplies (i.e. high inventory levels and strong Marcellus production) should limit price strength in both magnitude and duration. New England and portions of northern New York may experience very sharp price spikes in January due to pipeline congestion on Tennessee Gas and Algonquin pipelines. This congestion is due to the secular decline of Canadian imports and increased dependency of gas for heating and power. Indications are that the futures market has priced-in these effects, with gas basis prices trading below the five-year average in the Mid-Atlantic (i.e., Tetco M3), but well above the five-year average in New England (i.e., Algonquin Citygates). Power prices at Mass Hub are expected to be firm, while expectations at PJM Western Hub are much more modest. Soft power and gas prices are also expected in Texas, California and the Midwest due to the mild January temperatures expected in those regions.”

In February, WSI forecasts:

  • Northeast     – Colder than normal
  • Southeast     – Warmer than normal
  • N Central     – Colder than normal
  • S Central     – Warmer than normal
  • Northwest     – Warmer than normal
  • Southwest     – Warmer than normal

“Colder-than-normal temperatures and above-average heating demand in the Midwest and Northeast should give a boost to aggregate North American gas demand and help to support prices in February. The increase in gas demand in these key demand regions should more than offset the below-normal heating demand expected in the South and West. Typically, Mid-Atlantic gas basis prices would surge under these circumstances. But with new shale gas supplies in Pennsylvania, Tetco M3 gas prices should only experience modest price strength, relative to Henry Hub. The above-normal aggregate heating demand should help to rebalance inventories and gas prices (which finished last winter at record high and low levels, respectively). While the colder-than-normal temperatures expected in the Midwest will increase power and gas demand in the region, the upside may be limited. Coal-fired generation that has been sidelined due to poor economics should find some breathing room to increase run rates in February, as gas demand for power competes with demand for heating and strengthens gas prices. However, increased coal-fired generation would work to limit upside price risk for both the power and gas markets,” Kostas noted.

In March, WSI forecasts:

  • Northeast     – Warmer than normal
  • Southeast     – Warmer than normal
  • N Central     – Warmer than normal
  • S Central     – Warmer than normal
  • Northwest     – Colder than normal
  • Southwest     – Warmer than normal

“With mild March temperatures expected for nearly the entire country (except the Northwest), aggregate North American gas demand should finish the winter heating season very soft. This will likely soften prices following the price bump that we expect to occur in February. With natural gas production expected to remain strong, a mild March could easily leave natural gas inventories above 2,000 Bcf again this year. Soft heating demand and below-normal electrical loads in March increase the downside risk profile for power and gas prices in ERCOT, MISO, PJM, New York and New England. However, implied market heat rates could firm in some of these regions due to marginal coal units being priced-out of the market due to poor economics,” Kostas added.

WSI provides customized weather information to global commodity traders via its industry-leading WSI Trader Web site. WSI will issue its next seasonal outlook on January 22.

*To view the map defining WSI’s US regions, click here.

About WSI Corporation
WSI (Weather Services International) and Weather Central are the world's leading providers of weather-driven business solutions for professionals in the energy, aviation, insurance and media markets, as well as multiple federal and state government agencies. Together they comprise the professional division of The Weather Company and are owned by a consortium made up of NBC Universal and the private equity firms, The Blackstone Group and Bain Capital.

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:
Linda Maynard    
WSI
(978) 983-6715    
lmaynard(at)wsi(dot)com

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

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

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