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Forecast for cold fall and winter

October 26, 2011, Andover, MA - WSI (Weather Services International) expects the upcoming period (November-January) to average cooler than normal in all of the northern and eastern US, more good news for pellet makers after last week's heating cost forecast.


October 26, 2011
By Scott Jamieson

The WSI seasonal outlooks now reference a standard 30-year normal (1981-2010).
 
"While most of the major climate signals, including ocean temperatures in the major Northern Hemispheric basins and in the tropical Pacific, are again suggesting a cold winter, there are numerous indications that the cold will not be as extreme as it was during the last two winters," said WSI Chief Meteorologist Dr. Todd Crawford.

"Further, we think that the worst of the cold across the northern and eastern US will be in December and January, and that the back-half of winter could be significantly milder. In total, our forecast calls for a 6% reduction in heating demand relative to last winter, but a 5% increase relative to the 1981-2010 averages"
 
In November, WSI sees the monthly breakdown as:
Northeast* -Colder than normal
Southeast *- Colder than normal
N Central*   – Warmer than normal
S Central*    – Warmer than normal
Northwest* -Warmer than normal
Southwest* – Warmer than normal
 
According to Chris Kostas, Senior Power and Gas Analyst at ESAI, "In November, the heating season will begin in earnest east of the Mississippi. With above-normal heating demand expected, withdrawal rates from natural gas storage are likely to run above normal in the Consuming East (currently 1% below both last year's level and the 5-year average). Production is growing quickly in the Marcellus Shale region (particularly northeastern Pennsylvania), however. This year-over-year incremental increase in regional supply will partially offset weather-related demand for stored natural gas. On balance, we believe November natural gas prices are likely to firm from current depressed Nymex levels (the November Nymex contract has averaged around $3.60/MMBtu through the first three weeks of October)."

"Power prices and implied market heat rates in the South and Northeast (including PJM, NY and New England) are also likely to get a boost from the colder-than-normal temperatures. Milder weather west of the Mississippi will offset some of the increased gas demand from the East, and western gas basis prices (along with implied market heat rates) are expected to be relatively soft. This should translate into subdued power prices and volatility in ERCOT and California."
 
In December, WSI forecasts:
Northeast    -Colder than normal north & warmer than normal south
Southeast    – Warmer than normal
N Central     – Colder than normal
S Central      – Warmer than normal
Northwest   -Colder than normal
Southwest   – Warmer than normal, except California
 
Kostas further noted, "In December, colder-than-normal temperatures across the northern tier of the U.S. should continue the above-normal heating demand in the Consuming East that began in November. Some of the increased demand from the Mid-West should be offset by the slightly warmer-than-normal temperatures that are expected throughout the South and along the East Coast, however. The Northwest and West Coast are also expected to be cooler than normal. This will boost the relatively soft western basis prices expected in November."

"Historically, a colder-than-normal December translates into firm Henry Hub prices. As a result, we expect natural gas prices will continue the uptrend that is likely to begin in November. Power prices in Northeast markets should be supported by the colder-than-normal temperatures as well, whileslightly warmer-than-normal temperatures in Texas and Florida should provide for moderate power prices in those markets."
  
In January, WSI forecasts:
Northeast    – Colder than normal
Southeast    – Warmer than normal
N Central     – Colder than normal
S Central      – Warmer than normal
Northwest   – Colder than normal
Southwest   – Warmer than normal
 
Kostas added, "In January, much colder-than-normal temperatures in the Midwest could combine with the new Cross-State Air Pollution Rule to push western PJM power prices (including Chicago) higher. Newly defined limits on coal-fired generators' emissions are likely to reduce some coal-fired power generation in the Midwest, which supports implied market heat rates and power prices. The increase in demand from gas-fired generators and the colder-than-normal temperatures will support gas prices."

"Despite increased supplies from Marcellus Shale and rapidly increasing drilling activity (e.g., the Baker Hughes rig count hit a 9-month high in October), natural gas inventories are likely to draw down rapidly in January. Though much of the increased demand expected in the North will be offset by warmer-than-normal temperatures in the South and California, the trend toward higher gas prices that we believe will begin in November could continue into January."
 
WSI, which provides customized weather information to energy traders, will issue its next seasonal outlook, including the final forecast for winter (December-February), on November 22.
 


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