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WSI: North Pacific Signal to Warm Northeast To Year's End

Much of the eastern United States will experience generally mild temperatures through the end of the year despite an El Nino event in the tropical Pacific Ocean, as cooling waters in the more northern Pacific begin to exert their influence on North American weather patterns, according to forecasters at Andover, MA-based Weather Services International (WSI). And the 2012 Atlantic hurricane season may already be winding down, WSI said.

"Evidence is continuing to build that the emerging El Nino event is going to be relatively weak, and WSI believes that the impacts of the strong PDO [Pacific Decadal Oscillation] signal will more or less trump the El Nino signal, going forward," said WSI Chief Meteorologist Todd Crawford.

"The biggest wild card heading toward winter is the degree of atmospheric blocking in the North Atlantic, typically referred to as the North Atlantic Oscillation (NAO). Over the last few winters there have been wild swings in the NAO, from historically strong blocking winters (2009-10 and 2010-11) and very cold eastern U.S. temperatures, to historically weak winters (2011-12) with record warm temperatures.

"It is still too early to predict the behavior of the NAO for the upcoming winter, but it is clearly the key to a successful winter forecast. For now, we are relying on the PDO signal, which generally suggests a cool period for the western U.S. and a mild period in much of the East."

WSI expects warmer-than-normal temperatures to dominate across the entire country except Florida and the West in October, a pattern that would ensure power and natural gas demand is soft and stable, according to Energy Securities Analysis Inc. senior analyst Chris Kostas.

"Gas prices will likely remain subdued as below-normal heating demand helps to push natural gas inventories above last year's record," Kostas said. "Low gas prices and soft shoulder-season demand will keep power prices under pressure. Some power price weakness will be offset by seasonal generation maintenance, however. Implied market heat rates should be firm as gas-fired generators continue to replace coal-fired generators that are struggling to compete in the low gas price environment."

WSI's forecast map remains essentially the same in November, with cooler-than-normal temperatures in the Southeast, and eastern Texas dropping out of the warmer-than-normal category the only changes.

"Warmer-than-normal temperatures in the Northeast and the Great Lakes region in November will reduce early season heating demand in those key regions," Kostas said. "Gas prices should remain soft due to below-normal heating demand. The mild temperatures should also ensure that natural gas inventories will hit a new record in November. In Reuters' most recent end-of-season storage poll, analysts forecast natural gas inventories will peak at 3,973 Bcf (ESAI's forecast is 3,925 Bcf)."

An Energy Information Administration (EIA) official recently said he expects gas demand for electricity generation this winter to be about the same as it was last winter (see NGI, Sept. 17). The power burn will likely be 2.5-2.6 Tcf, and the amount of coal-fired generation capacity that is used during the winter months will depend on natural gas prices, EIA Deputy Administrator Howard Gruenspecht said. In its most recent Weekly Gas Storage Report, EIA reported 3,496 Bcf in storage, which was 320 Bcf more than a year ago and 278 Bcf more than the five-year average.

By December WSI expects temperatures to average warmer than normal in the Northeast, Central (except the Dakotas and northern Minnesota) and Southwest (except southern California), while the Southeast and Northwest are expected to be colder than normal.

"With mild temperatures expected to stretch from Texas to New England in December, delivered gas prices are likely to remain subdued heading into winter," Kostas said. "Natural gas basis pricing in the Northeast typically begins to increase delivered gas prices in December. However, with mild weather and continued growth of Marcellus shale gas production this year, Northeast basis prices are expected to be very soft, relative to historic averages. New England could be the exception, however, as Algonquin Citygates basis pricing has been demonstrating seasonal strength.

"Power prices in MISO, PJM and New York are likely to be soft, as a result of the mild, early winter power demand and weak delivered gas prices. Power and gas prices are also likely to be soft in ERCOT in December due to the mild temperatures," Kostas said.

The closing weeks of the 2012 Atlantic hurricane season, which officially runs until Nov. 30, will see what has been a busy tropical season winding down quickly, according to WSI, which increased its forecast to 17 named storms, including nine hurricanes, two of them major (Category 3 or higher).

There have already been 14 named storms and eight hurricanes since the season began June 1. In its previous update, WSI had said it expected 14 named storms, including seven hurricanes, three of them major (see NGI, Aug. 27). The Atlantic basin this year has "clearly been more active than we expected," said WSI Chief Meteorologist Todd Crawford.

"The tropical Atlantic Ocean temperatures warmed considerably during the summer and the patterns of stronger-than-normal wind shear, typically observed during emerging El Nino events, took longer to arrive than originally thought," Crawford said. "However, the last couple of weeks have been fairly quiet; considering we are at what has historically been the most active time of year. Further, medium-range guidance does not indicate any strong signal for increased activity through the rest of September as an enhanced subtropical jet stream develops.

"Finally, the historical data suggest that tropical seasons often end rather abruptly as El Nino advances. In fact, no more than three named storms have developed after Sept. 20 during the last four appearances of El Nino events. The weight of evidence suggests a slow finish to the season, and we are only expecting three more named storms and one hurricane during the remainder of the season."

The only storm to have caused serious trouble for energy interests in the Gulf of Mexico (GOM) so far this year was Hurricane Isaac, which made landfall Aug. 28 and ultimately disrupted gas processing operations for more than 10 Bcf/d of the 13.5 Bcf/d of total processing capacity in the affected area, according to Energy Information Administration data (see NGI, Sept. 17). The Bureau of Safety and Environmental Enforcement estimated that 75.52% (3.264 Bcf/d) of daily natural gas production and 94.99% (1.311 million b/d) of daily oil output in the GOM was shut in in the immediate aftermath of the storm (see NGI, Sept. 3).

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