Colder-than-normal temperatures will move into large portions of the eastern and Central United States as 2015 begins, according to Weather Services International (WSI), which could put some mid-winter pressure upward on natural gas demand and prices.
"As we look towards winter, our blend of statistical and dynamical forecasting tools are suggesting 'a tale of two seasons', with generally mild weather for the remainder of the fall followed by a pronounced pattern change towards much colder temperatures across parts of the central and eastern U.S. after the New Year," said WSI Chief Meteorologist Todd Crawford.
"The emergence of the current El Nino event suggests that the focus of the cold weather this winter will be farther east and south than last winter, while other recent changes to atmospheric/oceanic patterns suggest that cold air outbreaks will be more common during late winter. The magnitude of the cold will be modulated by the amount of North Atlantic 'blocking', and this is still a significant wild card as we head into future forecast updates."
WSI forecasters expect warmer-than-normal temperatures to dominate across most of the country in November, with temperatures averaging cooler than normal only in the South Central and the western portion of the Southeast.
"Below-normal aggregate weather-related demand should keep natural gas and power prices soft and stable in November," said Energy Securities Analysis Inc. Senior Analyst Chris Kostas. "We also believe warmer-than-normal November temperatures along the population-heavy coastal regions of the East and West will continue to reduce the year-over-year natural gas inventory deficit. With soft aggregate demand expected in November and the possibility that injections could continue into early November, inventories should be in good shape heading into the winter."
The Energy Information Administration (EIA) recently said working inventories of natural gas totaled 3.3 Tcf on Oct. 10, a 9.4% (0.34 Tcf) decrease from inventories at the same time last year, and 9.9% (0.36 Tcf) below the previous five-year average covering 2009-2013 (see Daily GPI,Oct. 16a). The Federal Energy Regulatory Commission's Office of Enforcement said last week that even a colder-than-normal winter in the Northeast and normal winter weather elsewhere could leave storage levels entering the 2015 refill season at about 1.8 Tcf, a full 1 Tcf higher than spring 2014.
In December, WSI forecasters expect only the south-central United States to remain colder than normal, with warmer-than-normal temperatures dominating across the rest of the country.
"With generally mild temperatures expected in November and December, power and natural gas prices should remain relatively stable through the end of the year," Kostas said. "Considering warmer-than-normal temperatures are expected in the Northeast and cooler-than-normal temperatures are expected in Texas, regional gas prices in the Marcellus region (i.e., PJM) should remain soft relative to Henry Hub in December. New England natural gas prices, which are widely expected to be firm due to pipeline constraints during the winter, may also find some relief with mild December temperatures."
With the end of the calendar year, the East will turn colder than normal, according to WSI forecasters.
"With colder-than-normal temperatures expected in the population-rich eastern half of the country, energy demand is likely to increase dramatically in January," Kostas said. "Natural gas prices should rise as a result of the colder-than-normal temperatures. Although natural gas inventories this winter are likely to be below last year's levels, gains in shale-gas production over the summer should effectively offset the inventory deficit."
Winter 2013-2014 brought harsh weather to much of the country, including polar vortices that drove the number of heating degree days to unusual highs and U.S. natural gas consumption 15% higher than the prior winter (see Daily GPI, Oct. 16b; Feb. 10; Feb. 6). Forecasters at the National Oceanic and Atmospheric Administration (NOAA) have said a repeat of the extremely cold, snowy winter east of the Rockies isn't likely.
But a recent AccuWeather.com winter forecast ran counter to the WSI and NOAA prognostications, saying conditions are ripe for a winter similar to 2013-2014.
Even if the polar vortex returns this winter, many factors would likely keep prices in check and the increased demand for natural gas from outpacing supplies in the market, according to analysts at Genscape Inc. (see Daily GPI, Oct. 17). Genscape has forecast that total gas production in the Lower 48 during the 2014-2015 winter season will be about 5.1 Bcf/d greater than last winter.