Daily GPI / Markets / NGI The Weekly Gas Market Report / NGI All News Access

WSI: Wild December Weather to Give Way to Winter Warming Trend

Demand for natural gas isn’t likely to spike unusually higher over the next three months, based on a forecast from Weather Services International (WSI) that calls for temperatures to average warmer than normal across much of the United States, with the exception of parts of the North Central and Northeast regions.

The more moderate weather would follow what has been a "wild" December, the forecasters said. The month was marked by wide swathes of arctic cold and powerful winter storms that pushed natural gas pipelines and imports to their limits (see Daily GPI, Dec. 6).

"As expected, the worst of the cold has been confined to northern latitudes in December, with above-normal temperatures confined to parts of the Southeast and Southwest. The very cold pattern is expected to relax a bit in late December, and we feel that the worst of the persistent extreme cold may be behind us as we head into the New Year," said WSI Chief Meteorologist Todd Crawford.

"The current pulse of the Madden-Julian Oscillation has disrupted the prevailing very cold pattern, and the evidence suggests it may not return, at least not to the magnitude observed during the last month. The polar vortex remains fairly strong, and our models suggest that it may not break down this year as it has so often over the last decade. If this is true, much of the country may be basking in warmer-than-normal temperatures for the remainder of the winter."

WSI expects warmer-than-normal temperatures to dominate across the United States in January, with only the northern tier of the Northeast remaining colder than normal.

"After a cold start to the winter season, warmer-than-normal weather in January will result in lower overall natural-gas demand than normally seen in January," said Paul Flemming, director of power and gas at Energy Security Analysis Inc. (ESAI). "In addition, warmer temperatures will ease congestion on the more constrained natural-gas pipelines in New England and eastern New York. Power demand will increase with seasonal temperatures in January, although prices in most regions will be dampened by slightly lower power demand as well as a moderation in gas prices as a result of warmer temperatures."

Most of the country will remain warmer than normal in February, though the Northern portion of the Northwest -- including Seattle -- and the North Central region are expected to average colder than normal, according to the WSI analysts. That could boost overall gas demand to slightly stronger-than-normal levels, Flemming said.

"In addition, much warmer-than-normal temperatures in the Southeast and Southwest will also moderate gas demand, offsetting increased demand from the colder northern states. Energy prices and market heat-rates in most markets should be close to normal levels for February, except where pipeline constraints exist, such as in New England, where delivered gas prices are becoming increasingly sensitive to the demand patterns of colder temperatures," said Flemming.

By March, WSI expects colder-than-normal temperatures only in the North Central and the northernmost Northeast, with the rest of the country firmly in the warmer-than-normal column.

"Overall warmer-than-normal temperatures across the eastern seaboard and much warmer-than-normal temperatures from the Gulf states to the West will dampen expectations for natural gas demand as the end of the heating season approaches," Flemming said.

WSI winter forecasts continue to dovetail with the National Oceanic and Atmospheric Administration's (NOAA) Winter Outlook, which called for above-average temperatures across most of the South and portions of New England (see Daily GPI, Nov. 21). Forecasters at the Farmers' Almanac, on the other hand, expect the winter will be colder than normal for most of the United States (see Daily GPI, Aug. 27).

With the exception of localized spikes during periods of high demand, natural gas prices aren't expected to increase significantly this winter, according to the Federal Energy Regulatory Commission’s Winter 2013-2014 Energy Market Assessment (see Daily GPI, Oct. 17). And the U.S. Energy Information Administration -- which expects the Henry Hub spot price for natural gas to increase to $4.00/MMBtu next year, compared with an estimated $3.71/MMBtu this year -- expects average winter temperatures this year to be roughly in line with the 10-year average (see Daily GPI, Oct. 9). Barring unexpectedly cold weather this winter, rising natural gas production will prevent prices from eclipsing $4/MMBtu, according to BNP Paribas' Teri Viswanath, director of commodity strategy (see Daily GPI, Nov. 11).

ISSN © 2577-9877 | ISSN © 1532-1231 | ISSN © 1532-1266

Recent Articles by David Bradley

Comments powered by Disqus