With the 2006-2007 winter now mostly in the rear-view mirror, traders and meteorologists alike are turning their attention to what kind of temperatures spring will bring to the United States. According to Andover, MA-based WSI Corp., the April through June forecast is expected to average warmer than normal in all locations except for the Pacific Coast states, which could start the natural gas storage injection season sooner than normal, but push electricity loads high enough in June to be bullish for power prices in the Midwest markets.
"It continues to look like a warm late spring and early summer pattern in much of the eastern U.S. as the impacts of the recent El Nino continue to fade," said Todd Crawford, a WSI seasonal forecaster. "In the nearer term, the migration of the polar vortex back to the Eastern hemisphere in late March should increase the odds of a warm April across much of the eastern U.S."
Referencing a standard 30-year norm (1971-2000), WSI's monthly breakdown for April points to warmer-than-normal conditions throughout the country with the exceptions of the Southwest and West Texas, which should be cooler than normal. During the month, Minnesota and North Dakota are expected to be significantly warmer than normal.
In analyzing WSI's April forecast, Energy Security Analysis Inc. (ESAI) said late heating-season natural gas demand would be lower than average under the current warmer outlook and should promote lower withdrawals and ultimately an early start to the injection season, which would be directionally bearish for natural gas prices. "Shoulder-period demand levels in most power demand areas means that temperature variations will not impact prices significantly," the analysis firm added. "Seasonally planned generator maintenance will have more impact on prices than weather in April."
WSI said the arrival of May is expected to bring cooler than normal temperatures throughout the West with the exceptions of Idaho, Montana and Wyoming while the rest of the country really begins to sizzle under some spring heat with warmer than normal conditions. States that are supposed to exhibit much-above-normal temperatures during the month include Pennsylvania, New Jersey, South Carolina, North Carolina, Virginia, Maryland, Oklahoma and Kansas.
"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 said. "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."
Approaching summer, the month of June is expected to throw a little twist in temperatures as the Northeast swings to cooler than normal, except for Pennsylvania, New Jersey and Delaware, according to WSI. Joining the Northeast in below-normal temperatures is the Northwest. Warmer-than-normal conditions will dominate the Southeast, Southwest and central portions of the country with the exceptions of Minnesota and North Dakota. Especially hot weather is expected in Texas, Nevada, Utah and Colorado.
"Warmer temperatures would increase cooling demand from the power sector and increase natural gas demand," ESAI said. "Planned generator maintenance should be mostly complete by early June, but the warmer temperatures will push loads high enough in June to be bullish for power prices in the Midwest markets."
WSI, which provides customized weather information to energy traders, said an update to the current forecast will be issued on March 29, with the next new forecast package for May-July and a first look at June-August to be issued on April 17.
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