Summer will end with cooler-than-normal temperatures dominating the East, a trend that is expected to carry over through October, but high temperatures will keep their grip on the central United States, according to forecasters at Andover, MA-based Weather Services International (WSI).
"This summer has been characterized by extreme heat and drought across much of the central U.S. and, unfortunately, there does not appear to be any immediate end in sight as we head into August," said WSI Chief Meteorologist Todd Crawford. "While the major cities of the eastern U.S. will experience more moderate summer temperatures in August, the Plains and Midwest will continue to suffer through hot, dry weather."
WSI's U.S. Energycast Forecast for August calls for cooler-than-normal temperatures in the East and Northwest (especially coastal areas), with warmer-than-normal temperatures expected in the Central (except southwest Texas) and Southwest (except coastal Southern California) areas.
"With cooler-than-normal temperatures expected along the East Coast in August, natural gas prices could see some late-summer price weakness, as gas inventories begin to approach last year's record level by the end of the month," said Energy Securities Analysis Inc.'s Chris Kostas, a senior analyst. "Usually, below-normal summer loads translate into lower implied market heat rates. However, this year, against the backdrop of very low gas prices and increased coal-to-gas switching, implied market heat rates could be firm.
"Coal-fired generators continue to struggle against efficient gas-fired plants and below-normal loads (particularly in PJM, New York and New England). In August we expect implied market heat rates will be steady but firm, due to below-normal cooling load and soft delivered gas prices in those regions." The Midwest Independent System Operator and Electric Reliability Council of Texas could see implied market heat-rate volatility and California power prices "are likely to remain relatively soft in August, due to mild temperatures, soft loads and low gas prices," Kostas said.
Warmer-than-normal temperatures are expected to move into the Southeast in September, while the North Central and Southwest areas will average cooler than normal, WSI said.
"Gas prices could soften further during the month as inventories approach last year's record level (i.e., 3,854 Bcf) and begin to approach 4,000 Bcf," Kostas said. "While we don't expect inventories to challenge 4,000 Bcf until October, we do expect gas price softness well before that level."
The Energy Information Administration (EIA) last week reported a build of 28 Bcf (see Daily GPI, July 20). Total Lower 48 storage stood at 3,163 Bcf, up 509 Bcf from a year ago and 470 Bcf more than the five-year average, according to EIA's Weekly Natural Gas Storage Report. EIA has said it expects that inventory levels at the end of October will set a new record high at 4,096 Bcf.
Cooler-than-average temperatures will return to the Southeast in October and the North Central area will see a return of warmer-than-normal temperatures (except in southern and central Texas), according to WSI.
"A mixed weather outlook in October may help to depress power prices throughout the country," Kostas said. "This is due to the softer delivered gas prices related to the record gas inventories that we expect."
WSI is scheduled to issue its next seasonal outlook on Aug. 21.
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