The growing consensus among weather forecasters is that much of the East will experience colder-than-normal temperatures this winter, with Andover, MA-based WSI Corp. saying it expects the November-January period to average cooler than normal across both the eastern and south-central United States, with above-normal temperatures dominating the western and north-central regions.
In a seasonal forecast issued last week, WSI called for a cold winter in the East, especially after the start of the new year, based largely on recent changes in Pacific Ocean temperatures and other factors, including reduced solar flux.
"Confidence in the cold winter forecast will increase further if snow cover builds rapidly at higher latitudes during October," said WSI seasonal forecaster Todd Crawford. "Our current forecast indicates a relatively benign start to winter, followed by a rather active and cold January and February."
WSI's forecast for November calls for warmer-than-normal temperatures in the West and colder-than-normal temperatures across the rest of the country -- weather that would give an early boost in aggregate heating demand, according to Energy Security Analysis Inc. (ESAI) analyst Chris Kostas.
"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," Kostas said in a statement issued in conjunction with WSI's outlook. "Inventories are expected to exceed the levels seen last year (and the five-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."
The Northeast will get a break in December, with warmer-than-normal temperatures moving in there and in the North Central states, including much warmer-than-normal temperatures in the Great Lakes region, WSI said. At the same time, colder-than-normal temperatures are forecast to take over across the West. Lower electrical loads due to the weather will combine with the effects of slack industrial demand, while increased supply from the REX-East pipeline are likely to displace supply from Henry Hub and temper the effects of the chilly forecast for the South, according to 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," he said.
WSI expects colder-than-normal temperatures to return to the East by January and warmer-than-normal temperatures to take over across the West. Despite record natural gas inventories entering the winter, a colder-than-normal January in the East could push the supply picture back into balance for 2010, according to Kostas, who said low gas prices relative to fuel oil could significantly limit fuel-switching for power generation.
"The effect of this large spread increases local gas demand (particularly in the Northeast) and will support delivered gas prices," he said. "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. In the West, warmer-than-normal temperatures should keep January regional gas and power prices subdued."
WSI's winter forecast calls for a continuation of below-normal temperatures dominating in the East in February, with above-normal temperatures across the northwestern half of the country.
WSI's outlook was in line with forecasts issued last week by the National Oceanic and Atmospheric Administration (NOAA) and AccuWeather.com Chief Long Range Forecaster Joe Bastardi (see NGI, Oct. 19). NOAA and Bastardi each called for colder weather across portions of the East in coming months, and each said the nation's winter weather will be significantly effected by El Nino. But NOAA said it expected the current El Nino -- the warming of surface temperatures in the central and eastern equatorial Pacific Ocean -- to strengthen and persist through the winter, while Bastardi said El Nino will fade over the same period.
A cold start to the winter season could snap natural gas storage inventories lower and send prices higher, but it will take a lot more to bring the overflowing storage situation back to a neutral level, according to Barclays Capital analysts (see NGI, Oct. 12). Only a 10% colder-than-normal winter over the 30-year average, they said, would bring storage balances "back to still near-record levels of last year."
The WSI seasonal outlooks reference a standard 30-year norm (1971-2000). The next WSI forecast, for December-March, is scheduled to be issued Nov. 24.
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