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WSI Sees Cold Winter in the East, Especially in December

While the National Oceanic and Atmospheric Administration (NOAA) continues to call for a warmer-than-normal winter, Andover, MA-based WSI Corp. said Tuesday that it expects December-February to average cooler-than-normal temperatures in the major cities along the East Coast, with warmer than normal readings expected across the western two-thirds of the U.S. The WSI seasonal outlooks reference a standard 30-year norm (1971-2000).

NOAA reiterated once again last week that it expects this season to be warmer than the 30-year norm across much of the nation, yet cooler than last year's very warm winter season (see Daily GPI, Nov. 17). If the forecast holds up, natural gas and power prices during this heating season could soften. However, NOAA's view of winter continues to differ significantly from the forecast of the 2007 Farmers' Almanac (see Daily GPI, Aug. 31) as well as those of a number of independent forecasters including AccuWeather (see Daily GPI, Oct. 19), which are calling for colder than normal temperatures in certain regions. Tuesday's forecast from WSI appears to side closer to AccuWeather's view.

"The current weak-to-moderate El Nino event, combined with the above-average snow cover build in the northern hemisphere, suggest that a cold winter is in store for parts of the eastern U.S.," said WSI seasonal forecaster Todd Crawford. "The primary opposing factor is the northern Pacific ocean temperatures, which argue for a very warm winter nationwide. We feel that December will be the coldest month of the winter, relative to normal, in the eastern U.S., followed by a general moderation during the rest of the winter."

Breaking down the forecast by month, WSI sees December bringing colder than normal conditions to the East, while the entire central and western portions of the country experience warmer than normal conditions. Washington, Oregon, Idaho and Nevada are expected top be much warmer than normal during the month.

Providing analysis on WSI's forecast for December, Wakefield, MA-based Energy Security Analysis Inc. (ESAI) said a colder December in the Northeast will be bullish for natural gas and power demand but natural gas demand will be largely offset by warmer temperature expectations in all other regions.

"Natural gas inventories are finishing the injection season at very high levels, and the generally warmer December outlook should be moderately bearish for natural gas prices," ESAI said. "Power prices in the Northeast will be slightly bullish under the cold December forecast, although prices will be somewhat contained by moderate gas prices and the completion of seasonal generator maintenance."

Contrary to normal winter expectations, WSI said it expects January to actually be warmer than normal in more regions of the U.S. than December. The forecasting firm sees warmer than normal temperatures for the entire country with the exception of the Northeast, which is expected to remain cooler than normal. North Dakota and South Dakota are expected to experience especially warm temperatures for the month.

"Warmer temperatures in most regions -- particularly the North Central region -- will result in lower demand for natural gas from both the heating and power sectors," ESAI said about WSI's January forecast. "Higher gas demand from the Northeast will not be enough to offset moderate demand from other areas. With generally mild temperature expectations in December and January, and with maximum storage levels to start the season, natural gas price spikes during periods of colder weather may not be as volatile as there should be no expectations of shortages towards the end of the heating season. Power prices in the Northeast will be bullish due to increases in natural gas prices to Northeast delivery points, particularly during colder weather periods."

The arrival of February should see the flip-flop of the east regions, with the Northeast exhibiting warmer than normal temperatures while the Southeast sees colder than normal conditions, especially in Florida. The rest of the country is expected to be warmer than normal with the exception of Texas, which will be cooler than normal during the month. Montana, Wyoming, Nevada and Utah are expected to be much warmer than normal.

Breaking down the February forecast, ESAI said cooler weather in the Southeast will have "no significant impact" on gas demand. "If the generally warm December and January forecasts are realized, then the warmer February outlook will be bearish for natural gas prices," the analytical firm said. "This in turn will be generally bearish for power prices as fuel prices trend lower due to lower demand."

WSI said an update to the current forecast will be issued on Nov. 30 with the next new forecast package (for January-March) issued on Dec. 19.

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