“El Nino” apparently isn’t Spanish for “low natural gas prices.” Glance at last week’s record and near-record Gulf Coast and Northeast spot gas prices, a rare operational flow order on Transcontinental Gas Pipe Line and another in a string of cold fronts walloping the Northeast and it’s clear weather forecasters got it wrong this winter in a big way.

Many meteorologists are scratching their heads right now trying to figure out exactly how they were so wrong in predicting a warmer than normal winter for the Northeast. “One of the reasons why this winter was blown by a lot of government and other forecasters was this [over]reliance on El Nino,” said Michael Schlacter, chief meteorologist for Weather 2000, which accurately predicted a cold winter. “Everyone thought this was kind of a classic robust El Nino pattern, similar to ’97-98.” Even by early winter, many forecasters were predicting a very warm winter across the nation, he noted. “It wasn’t until recently that they indicated any chances of below normal weather at all.”

Dismissing El Nino, Schlacter said this winter has really been about many other factors, including lots of cold air pent up in Canada, storm tracks and snowfalls.

Jeff Shorter at Weather Services International was quick to point out that WSI did not forecast a traditional “El Nino winter” in contrast to the National Oceanic and Atmospheric Administration (see NGI, Sept. 16, 2002). “We forecasted a cold beginning and a warm ending. As we’ve been going through, we’ve been pushing the cold further out,” he said. However, WSI was incorrectly calling for warmer than normal temperatures for the January-March period in the Northeast as late as the first week in January (see NGI, Jan. 6).

Shorter said the major malfunction in the weather forecasting industry this winter was overestimating the impact of El Nino and underestimating the significance of events occurring in the northern Pacific and northern Atlantic Oceans. “A lot of traditionalists just latched onto” the classic El Nino. But two other unexpected events occurred, he said.

There was a sudden turnover in the Pacific Decadal Oscillation (PDO). The sea surface temperatures in the northern Pacific changed to a different phase and when that happens there are only weak El Ninos. It was the first time in 20 years that the PDO turned over, said Shorter.

“Basically looking at the past 20 years and using that as a trend became inappropriate. If you looked at the previous 20 years and used that as a trend you would have a winter more like what we go this year.”

In addition, there was a change in the North Atlantic Oscillation that set up a “blocking” pattern, which “sent a lot of Arctic air down into the northern tier of the United States,” he said. “When there was this blocking condition, the Northern Atlantic Oscillation, over Greenland, with the PDO it forced all the Arctic air down on top of us.”

Shorter said WSI is forecasting a turnover to warmer weather by mid March in the eastern United States. “The Northern tier will start to become warm and the South will still remain cool. It’s going to be a cold start to March, but after that all the seasonal signs are out there for us to turnover and get out of this bitter cold winter that we’ve been having in the eastern United States. It was a tough winter.”

Although national heating degree days this winter are still down 4% from normal, there have been are 15% more HDD’s this winter than last. In addition, unexpected cold pounded the eastern United States in January and February, causing significantly greater than average storage withdrawals and gas sendout by local utilities. It was in fact a near repeat of the perfect storm that crashed into the gas market in 2000-2001.

“No one foresaw the January and February that we were hit with in the East,” noted Kristin Domanski, manager of gas and power services at Energy Security Analysis Inc. (ESAI). “During the month of January, we took historic amounts of gas out of storage, rates never seen before…”

Part of the reason for that may have been the extended cold in the territories of the nation’s two largest storage operators, Dominion Transmission and Columbia Gas Transmission (see related story).

The sustained cold weather also served to confirm a lot of pent up technical strength in the gas futures market which helped increase prices across the board, and those higher prices prompted storage holders to sell even more gas out of storage than normal, Domanski added.

The cold also led to record winter power demand throughout the Northeast and Mid Atlantic. According to Chris Ellinghaus, senior equity analyst for power and natural gas at The Williams Capital Group LP, the market underestimated the impact of gas-fired power generation on winter storage withdrawals.

“We don’t have a five-year history of all these power plants being online and utilizing our gas resources,” Ellinghaus said. “When people look at the amount of gas in storage compared to the five-year average, it just isn’t relevant anymore. Low storage levels in conjunction with the fact that we’re having production declines with one of the coldest winters on record, at least in this part of the country [East], is kind of ominous.

“I’m worried about running out of gas not only this winter, but period.” Others have mentioned there might be some kind of gas rationing (perhaps price-induced) in the future, said Ellinghaus. “I think that is a real possibility. The likelihood that we will see prices go back down in the $2-3 range is almost a farce. I think natural gas prices will be $4-5 from now until the Alaska pipeline is built in 2013.”

Domanski said ESAI is predicting working gas levels will end the winter below 800 Bcf and possibly as low as 540 Bcf, which would be a record. Many storage fields could hit record lows and some may be tapping into base gas. With such low levels of gas in storage in April, the industry will have a tough time refilling storage this summer, particularly if it is warmer than normal.

“The bigger concern clearly is where we are going to be next fall,” said Domanski. “If we have a hot summer and a strong draw from the power sector — and there will be a lot of new gas-fired generation capacity coming on line in ERCOT, the West and the Northeast — it has a potential to dampen the fill rate,” she said. “A couple of years ago during the summer heading into the crisis (2000), storage was about 66% full and we are forecasting something around that level by the end of this summer.

“But if you had a crystal ball, you could predict the weather. The situation we’re in now was caused mainly by the weather and no one saw this one coming. You don’t really know what the weather is going to be like until you wake up in the morning.”

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