WSI Expects a Return to More Moderate Winter Temperatures, but Still Anticipates Slightly Colder-Than-Normal Conditions Across Northern and Western US

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US Gas-Heating Demand Expected to be Lowest Since 2006-07 Winter

WSI US Weather Outlook Dec 2011-Feb 2012

WSI US Weather Outlook Dec 2011-Feb 2012

The winter pattern will be dominated by the current La Nina event, which favors below-normal temperatures across the northern US and above-normal temperatures across most of the South.

WSI (Weather Services International) expects the upcoming period (December-February) to average colder than normal across most of the northern and western US, with above-normal temperatures confined to the south-central and southeastern states. The WSI seasonal outlooks now reference a standard 30-year normal (1981-2010).

“So far, November has been fairly mild across the major energy demand centers of the US. While no short-term change to this pattern is expected, we do foresee a trend towards colder temperatures across much of the northern US, including the Midwest and Northeast, in December,” said WSI Chief Meteorologist Dr. Todd Crawford. “The winter pattern will be dominated by the current La Nina event, which favors below-normal temperatures across the northern US and above-normal temperatures across most of the South. The temperatures across the eastern US will be further modulated by the North Atlantic Oscillation (NAO). During the last couple of years, a strong negative phase of the NAO has been dominant, which has resulted in very cold winters across much of the eastern US. It does not appear that this extreme negative NAO phase will occur again this winter, which we think will result in a milder winter across all of the eastern US. For the December-February aggregate period, we still feel that slightly below-normal temperatures will occur north of a Denver-Philadelphia line and across all of the western US. However, from a gas-demand perspective, we expect this to be the mildest winter in the US since 2006-07. In total, our forecast calls for a 7.5% reduction in heating demand relative to last winter, but a 4% increase relative to the 1981-2010 averages.”

In December, WSI sees the monthly breakdown as:
Northeast*     – Colder than normal
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, “In December, colder-than-normal temperatures across the northern tier of the U.S. and along the West Coast should mark a major shift in heating demand. With relatively mild temperatures expected through the end of November, the colder-than-normal temperatures in the Consuming East and Consuming West in December will create a sharp boost in gas demand. This will likely pressure gas prices higher. The December Nymex Henry Hub contract hit fresh life-of-contract lows in mid-November, trading as low as $3.33/MMBtu. Spot gas prices will likely trade higher than this level in December, once the below-normal temperatures take hold. Some of the increased demand from the North and West will be offset by the slightly warmer-than-normal temperatures that are expected throughout the South, however. Historically, a colder-than-normal December often translates into firm Henry Hub prices as traders with gas in storage are hesitant to sell significant volumes so early in the season. Power prices in Northeast markets should also be supported by higher electrical loads as a result of the cold, while warmer-than-normal temperatures in Texas and Florida should provide for moderate power prices in those markets.”

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

Kostas added, “In January, ESAI continues to believe that the colder-than-normal temperatures that are forecast in the Midwest and Northeast are likely to combine with the new Cross-State Air Pollution Rule to push western PJM power prices higher. New limits on sulfur dioxide emissions are likely to reduce coal-fired power generation in the Midwest by a small but measurable amount. An increase in demand from gas-fired generators called on to replace the generation from these coal plants, and the colder-than-normal temperatures should combine to support gas prices. On-peak and off-peak power prices in PJM are also likely to be firm as a result of the cold weather, firm gas prices, and reduced coal burn. Despite increased supplies from Marcellus Shale and robust drilling activity, natural gas inventories are likely to draw down meaningfully in January as a result of the cold. Though some of the increased demand expected in the North and West will be offset by warmer-than-normal temperatures in the South, the trend toward higher spot gas prices, that we believe will begin in December, should continue into January.”

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

Kostas added, “While New York, New England and the Great Lakes region are expected to run slightly colder-than-normal in February, a large portion of the Midwest and the Mid-Atlantic region will run slightly warmer than normal. Combined with warmer-than-normal temperatures throughout the Southeast, the mild temperatures should soften aggregate heating demand in February. This could soften delivered gas prices along the Northeast relative to January. The West Coast may not participate in the softer gas price trend of the East, however, as slightly colder-than-normal temperatures are expected in that region.”

WSI, which provides customized weather information to energy traders, will issue its next seasonal outlook on December 20.

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

About WSI
WSI (Weather Services International) is the world's leading provider of weather-driven business solutions for professionals in the energy, 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.

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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