The next three months on average will be warmer than normal across much of the country, according to forecaster WSI Corp., a conclusion that analysts at Energy Security Analysis (ESAI) see as bullish for the natural gas and power markets.
“After a very cold April, it appears that warm weather will return to much of the East in May, especially in the Southeast. Further, as the summer progresses we expect the core of the heat to move from the Southeast in May/June to the Northeast by August,” said WSI seasonal forecaster Todd Crawford. “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 WSI weather gurus predict that May will be warmer than normal in the heavily populated Northeast and Southeast and in the South Central and Southwest areas, except coastal California. The exceptions are cooler than normal temps in the North Central region, except North Dakota and Minnesota, and in the Northwest.
“Early season cooling demand in the Northeast would increase electrical loads and natural gas demand for power,” ESAI points out. At the same time cooler weather across much of the northern United States would not likely provide much offset to the eastern increase. The analysts note that early cooling demand will run into a reduced power supply because of generator maintenance, thereby running up prices.
The outlook for June is for cooler than normal temps for the Northeast, except Pennsylvania and New Jersey, the North Central and the Northwest, while the Southeast, especially North and South Carolina, Virginia and Maryland, the South Central and the Southwest, especially Arizona and New Mexico, will be warmer than normal. The cooler temps in the Northeast will mean less natural gas demand, but some of that slack will be taken up by the warmer Southeast.
In July, almost every region will be warmer than normal, WSI said. The exception is the Southeast, which is expected to be cooler than normal. ESAI singled out the eastern PJM region as potentially subject to “heat events,” which will be bullish for power prices. Coastal California will buck the warmer than normal trend, which should take some pressure off power prices in that region.
Andover, MA-based WSI, which provides customized weather information to energy traders, issues its seasonal outlook twice-monthly. An update to the current forecast will be issued on April 26, with the next new forecast package (for June-August) issued on May 15.
ESAI, based in Boston, provides ongoing systematic analysis of energy prices in the oil, natural gas, and energy markets.
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