Solidifying the general belief that this summer is expected to be warmer than normal for a majority of the country, Andover, MA-based WSI Corp.'s June-August forecast released this week called for just that. However, much like AccuWeather's summer forecast last week (see Daily GPI, May 18), WSI sees the real heat waiting to make an appearance during the middle of the season, which could put upward pressure on natural gas and power demand -- as well as prices.
Referencing a standard 30-year normal period (1971-2000), WSI said the upcoming summer will average warmer than normal in all locations except for the Pacific Northwest and parts of the northern Rockies and northern Plains.
"The combination of a very warm Atlantic Ocean and a neutral tropical Pacific, along with pre-existing low soil moisture values, suggest that the core of the heat will be focused in the South and East this summer," said Todd Crawford, a WSI seasonal forecaster. "It currently appears that a new La Nina event may not become fully established until later this year, similar to what occurred in 1995 and 2005."
The forecasting firm said it sees cooler than normal temperatures for the month of June in the Northeast, north central and Northwest regions of the country with the exceptions of Pennsylvania and New Jersey. The Southeast, south central and Southwest regions will likely experience warmer than normal conditions.
Analyzing WSI's forecast for the month, Energy Security Analysis Inc. (ESAI), said relatively low cooling demand in the Northeast would moderate electrical loads and power prices during June, while lower gas demand in the region from the power sector would be offset by increased demand across the southern tier of the country.
Heading into July, the real heat is expected to set in, according to the forecast. WSI said the entire country is expected to experience warmer than normal conditions during the month with the exception of the Southeast, which is expected to record cooler than normal temperatures, except for South Carolina and North Carolina.
"The WSI July forecast indicates warmer-than-normal temperatures in the Northeast and North Central regions, which provides an increased potential for heat events in the New York, PJM and MISO control areas," ESAI said. "This warm outlook is bullish for power prices and gas demand in these areas. Slightly cooler than normal temperatures are expected in the Southeast and slightly warmer than normal temperatures in the western regions. The overall warm outlook for the country is moderately bullish for natural gas demand and prices."
If WSI's outlook holds up, August could resemble a sauna with the entire country experiencing warmer than normal temperatures. The forecasting firm added that Texas, Idaho, Wyoming, Arizona and New Mexico could be especially hot during the month.
"The warmer temperature outlook across the southern tier of the country will be bullish for power prices as well as natural gas demand," ESAI said. "The rest of the country has only a slightly warmer-than-normal outlook which results in a lower possibility of frequent or extended heat events. Overall natural gas demand should be above-average under these forecast conditions."
WSI said an update to the current forecast will be issued on May 31, with the next new forecast package (for July-September) issued on June 19.
©Copyright 2007 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.