Coming as a mixed bag for energy bulls and bears, Andover, MA-based WSI Corp. said it expects the March-May period to average warmer than normal temperatures in the northeastern and western U.S., with below-normal temperatures confined to the Plains and the Mississippi and Ohio Valleys.
Following the deep freeze of the last couple of weeks in a number of regions of the United States, the energy industry's focus has moved to late winter-early spring weather conditions for their next cue on which way energy prices are likely to move.
"Our objective model guidance depicts a rather chilly spring in much of the eastern half of the U.S., due to the lingering effects of the recent El Nino event," said Dr. Todd Crawford, a WSI seasonal forecaster. "However, it appears that the rapid demise of El Nino may be quickly followed by a new La Nina event, which lends uncertainty to the spring forecast. Because of this, and because the emerging late-February pattern is almost identical to that typically associated with La Nina, we have modified some of the objective guidance in the East and have predicted slightly above-normal spring temperatures in the major population centers."
Breaking down the latest forecast on a month-by-month basis, WSI said it expects March to bring warmer than normal temperatures to a vast majority of the country with the exception of the south central region and Mississippi, which are expected to be colder than normal.
In analyzing WSI's forecast for the month, Energy Security Analysis Inc. (ESAI) said natural gas consumption should be slightly lower than the five-year average in the key heating demand areas across the northern tier of the country. "Although January was mild, February has been colder than normal in most of the heating demand areas," ESAI said. "Natural gas inventories have been falling relative to the five-year average due to the high demand so far in February. The warmer March outlook should help to keep gas inventories at or above the five-year average."
April is expected to bring a little more cooling to the nation as the Central region, the Southeast and Southwest are expected to be cooler than normal, with the exceptions of Florida, Alabama, Mississippi, California, Nevada and Utah. The Northwest and Northeast are expected to be warmer than normal during the month with the exceptions of Pennsylvania and New Jersey.
Taking a look at WSI's April forecast, ESAI said that the cooler weather across much of the Midwest could bring some late-season natural gas inventory withdrawals that could be higher than average. "However, above-average April gas withdrawals will not be significant enough to materially impact end-of-season inventory levels," the firm found. "Shoulder-period demand levels in most power demand areas means that temperature variations will not impact prices significantly. Seasonally-planned generator maintenance will have more impact on prices than weather in April."
The month of May looks like it will be much like April, with cooler than normal conditions in the central regions and the Southeast, except South Carolina and North Carolina. The Southwest is expected to be colder than normal except for California, Nevada and Utah, while the Northeast and Northwest experience warmer than normal conditions.
"Warmer temperatures in the Northeast could bring some early-season cooling demand in the Northeast markets increasing electrical loads and natural gas demand for power," ESAI pointed out. "Cooler weather across much of the Southern regions could reduce early-season natural gas demand from the power sector for cooling, offsetting any increases in the Northeast. Generator maintenance will be in full swing in most markets and generator outages will have the most impact on power prices."
WSI, which provides customized weather information to energy traders, issues its seasonal outlook twice-monthly. An update to the current forecast will be issued on Thursday, with the next new forecast package (for April-June) to be issued on March 13.
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