Warmer-than-normal temperatures are expected to be in place in the Northeast and across the south-central and western areas as well in September, while the Southeast and north-central areas will average cooler than normal, according to forecasters at Weather Services International (WSI).
That scenario could keep natural gas prices soft in New England past Halloween, according to Energy Securities Analysis Inc. Senior Analyst Chris Kostas. And the temperature forecast map isn’t likely to change any time soon.
While the East and most of the central United States have experienced fewer cooling degree days this month than in a typical August, New England, the Mid-Atlantic and some other regions — and the country as a whole — have accumulated more cooling degree days during the entire season than normal, according to National Weather Service data. A degree day is the difference between the mean daily temperature and the 65-degree Fahrenheit base.
“The summer has followed the general pattern established earlier in 2013 of below-normal temperatures extending from the northern Plains into the Southeast, with above-normal temperatures elsewhere. Strangely enough, our latest dynamical and statistical model guidance suggests that this pattern will persist through the fall season,” said WSI Chief Meteorologist Todd Crawford.
“Of course, the large-scale pattern is often modulated by the impact of re-curving tropical cyclones in September and October, and individual paths of these cyclones are unpredictable at long lead times. Because of this, confidence in the fall forecast, as is often the case, is reduced from typical values. Some of our indicators are beginning to suggest that a pattern change toward warmer-than-normal temperatures may occur across the northern Plains in November, so there is a warmer risk to our forecast in that region.”
Cooler-than-normal temperatures in the Midwest and Mid-Atlantic regions in September should help keep electrical loads below seasonal norms and push power prices and implied market heat-rates lower, according to Kostas. “Delivered natural gas in those regions should also see downward pricing pressure,” he said.
“Considering persistent negative basis prices seen between the Mid-Atlantic region and Henry Hub this past summer, discounts to Henry Hub are likely to increase in duration and magnitude as electrical load and gas demand softens in September. California and Texas, on the other hand, may see firm power prices and implied market heat-rates in September due to above-normal temperatures expected in those regions. Generator outages will also help to support prices as baseload generators begin their maintenance season. In California, reduced Northwest imports should also help to support power prices as run-of-river hydroelectric generation declines.”
With the warmer-than-normal trend hanging on in New England in October, “delivered natural gas prices may remain soft (especially if Canadian imports increase as expected due to new offshore production at Deep Panuke),” Kostas said. “With aggregate North American heating and cooling demand expected to be soft in October, natural-gas inventories are likely to close the year-over-year deficit by the end of the month. Weak natural gas demand from the power sector in August, coupled with the expected soft demand in September and October should allow inventories to challenge last year’s record. This would be bearish for natural gas prices in October in particular, and the winter in general, but is dependent on the mild weather forecast for the September/October time frame.”
WSI’s temperature forecast map remains unchanged in November, with a third straight month of cooler-than-normal temperatures expected in the Southeast. “This should help to lift mid-Atlantic delivered gas prices from the very soft levels we expect in October,” Kostas said. “The South is expected to be split between cooler-than-normal temperatures in Florida and warmer-than-normal temperatures in Texas.”
The months that traditionally see the most tropical storm activity are still to come, but energy interests in the Gulf of Mexico (GOM) may be breathing a bit easier after WSI once again lowered its Atlantic hurricane season projections last Thursday. The WSI forecast team said it now expects a total of 15 named storms to form in the Atlantic Basin, including eight hurricanes, three of them major (Category 3 or higher), in what it still believes will be a moderately active hurricane season.
“Although it has seemed like a relatively slow season so far, it is important to remember that 70% of all named storms and 80% of all hurricanes in the past 10 years have occurred after Aug. 15, so the heart of the season is still on the way,” Crawford said. “North Atlantic temperatures are still relatively warm, and the chances of an El Nino event (which would act to stifle tropical development) continue to drop, so we do still expect a moderately active season. Our analysis suggests that the odds of a ‘hyperactive’ season like 2005 and 2010 are quite low at this point, but that a season comparable to many seasons in the recent active-period era (since 1995) is still likely.”
In its first forecast of the Atlantic hurricane season, WSI had called for 19 named storms, including nine hurricanes, five of them major (see NGI, April 15). The forecasters subsequently trimmed that prediction to 16 named storms, including nine hurricanes, four of them major (see NGI, July 1). and last month lowered their forecast numbers to 16/8/3 (see NGI, July 29).
The 2013 Atlantic Hurricane season, which officially began June 1 and ends Nov. 30, has so far produced five named storms, none of which has posed much of a threat to GOM energy interests.
While the consensus forecast has been for above-average tropical storm activity this year, forecasters have been moderating their pre-season predictions. The National Oceanic and Atmospheric Administration (NOAA), which initially said it expected 13-20 named storms, including seven to 11 hurricanes, three to six of them major hurricanes, recently revised its forecast to 13-19 named storms and six to nine hurricanes, three to five of them major (see NGI, Aug. 12; May 27). Those forecast numbers would still make the 2013 Atlantic hurricane season more active than the seasonal average of 12 named storms, six hurricanes and three major hurricanes, NOAA said.
The Colorado State University forecasting team, which had initially estimated 18 named storms, including nine hurricanes, four of them major, recently said it now expects one less hurricane and one less major hurricane by season’s end.
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