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WSI Calls for 'Mild Heating Season' in the East Despite Cold January

Looking at the weather for the November-January period, WSI Corp. said last week that it expects the three-month period to average cooler-than-normal temperatures in the northwestern quarter of the country with warmer-than-normal temperatures elsewhere.

"The lack of any El Nino event, the sharp decrease in the [Pacific Decadal Oscillation], and the relatively slow Arctic snow cover build-up all argue for a mild heating season in the East this year, although our seasonal models do suggest a good possibility for some cold weather in January," said WSI seasonal forecaster Dr. Todd Crawford.

Referencing a standard 30-year normal, the forecasting firm said it expects November to be warmer than normal in the East and central regions of the U.S., with the West coming in a little cooler than normal.

Analyzing WSI's forecast for the month, Energy Security Analysis Inc. (ESAI) said the warmer outlook is favorable for late season natural gas injections to storage.

"Due to the recent above-average injections to storage (despite high Gulf production shut-ins of over 5 Bcf), ESAI expects storage levels to reach 3.1 Tcf by the end of October," ESAI said. "Warmer weather in the northern tier of the country should allow injections to continue into November and storage could reach 3.2 Tcf before the start of the withdrawal season. This should be moderately bearish for natural gas markets as supply concerns should ease somewhat."

Breaking down the December forecast, WSI is calling for more of the same. The forecasting firm said it expects the entire country to be warmer than normal with the exception of the Northwest region, which should see cooler than normal temps, especially in Washington.

ESAI said the prolonged warm weather should continue to help alleviate winter natural gas supply concerns, noting that a significant amount of Gulf production is likely to be still shut in during December.

"If December is warm, storage will not see a heavy early season draw and will help to keep markets from being too volatile to the upside," ESAI said. "Prices may not move lower, but the early season low-demand outlook will ease supply concerns. Demand for electricity will also be lower under the warmer outlook and the resulting lower loads will moderate prices in the northern-tier power markets."

The arrival of January will mark a switch of sorts for temperatures, with the entire East, North Central and Northwest regions recording cooler than normal temperatures. The South Central and Southwest regions will likely remain warmer than normal during the month.

ESAI pointed out that the big concern in the Northeast markets is for extreme cold in January due to the potential for gas delivery curtailments due to gas pipeline limitations under very high demand conditions.

"Severe cold weather tends to take a toll on generator operations in the form of higher levels of forced outages," ESAI said. "The cold January outlook in the Northeast suggests that there is some potential for regional spikes in gas and electricity prices."

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