WSI: Significant Increase in Natural Gas Heating Demand Relative to Last Year Expected from Late Fall into Early Winter

Below-Normal Temperatures Expected to be Focused across Northern Tier Starting in November

ANDOVER, Mass. (September 24, 2013) — WSI (Weather Services International) expects the upcoming fall period (October-December) to be cooler than normal from the northern Plains into the Ohio Valley with above-normal temperatures elsewhere, particularly across parts of Texas and the Southwest. The WSI seasonal outlooks reference a standard 30-year normal (1981-2010).

According to WSI Chief Meteorologist Dr. Todd Crawford: “The lack of significant heat in the eastern US this past summer combined with a lackluster tropical season have resulted in a relative lack of market-sensitive weather events compared to recent years. However, recent trends in both climate models and our statistical models are becoming more suggestive of a cold start to heating season, especially by November, across the population-rich areas of the north-central and Great Lakes states. Further, an early look at indicators for the upcoming winter suggest that the back half of winter may be characterized by more widespread cold. Our first look at the November-January period suggests that aggregate natural gas usage for heating will be up 9% year-over-year. We will continue to monitor the important drivers of the winter pattern, such as El Nino and the expansion of high-latitude snow cover, ahead of our October release.”

In October, WSI sees the monthly breakdown as:
Northeast – Warmer than normal
Southeast – Warmer than normal, except FL
North Central – Warmer than normal
South Central – Warmer than normal
Northwest – Warmer than normal, except WA & northern ID
Southwest – Warmer than normal

According to Chris Kostas, Senior Power and Gas Analyst at ESAI Power LLC: “Weather-related natural-gas demand should average below seasonal norms in October - considering the warmer-than-normal temperatures that are expected over most of the country. While North American energy demand varies greatly by region in October (with heating demand in the North and cooling demand in the South), the heating component from the North contributes far more to aggregate natural-gas demand. Assuming the forecast for mild late-autumn seasonal demand, we expect natural-gas inventories will finish the injection season near 3,900 Bcf (just below last year’s historic record of 3,929 Bcf). Delivered gas prices in the Mid-Atlantic and Northeast regions should remain subdued in October and will likely average below Henry Hub due to strong regional production levels and mild seasonal demand. Despite soft North American electrical loads, coal and nuclear generator outages will help to support power prices and implied market heat-rates in October. There are no scheduled nuclear outages scheduled this autumn in New York or New England. This, when combined with below-normal electrical demand due to mild temperatures should help to soften power prices at Mass Hub and throughout New York.”

In November, WSI forecasts:
Northeast – Warmer than normal
Southeast – Colder than normal, except FL
North Central – Colder than normal
South Central – Warmer than normal
Northwest – Warmer than normal
Southwest – Warmer than normal

Kostas added: “Colder-than-normal Midwest and Mid-Atlantic temperatures in November should boost gas demand and energy prices following the mild temperatures and subdued prices of October. Stronger regional demand should also help to lift delivered gas prices in the Mid-Atlantic region from the very soft levels expected in October. New York and New England may be spared from significantly higher prices, however, as warmer-than-normal temperatures are expected in those markets. Delivered gas prices for TZ6-NY will likely be soft given the November weather outlook. Algonquin Citygates prices in New England have been firm over the past 12 months but with mild temperatures expected in November and increased gas production at Deep Panuke, spreads to Henry Hub will likely be softer than those seen last year. Generator maintenance will be complete by the end of the month and should provide a downward bias to implied market heat-rates as the month progresses.”

In December, WSI forecasts:
Northeast – Warmer than normal
Southeast – Warmer than normal
North Central – Colder than normal
South Central – Warmer than normal
Northwest – Warmer than normal
Southwest – Warmer than normal

Kostas continued: “A mixed picture is developing for December. While slightly-colder-than-normal temperatures and firm energy demand are expected in the Northern Plains and Midwest, slightly-warmer-than-normal temperatures and mild seasonal demand are expected over the major demand centers of the Northeast and Mid-Atlantic regions. Prices at Tetco M3 in PJM and TZ6-NY in New York City should be subdued in December as a result of the mild temperatures expected in those regions. In New England, December Algonquin Citygates prices have been very firm with forward price expectation near $8.50/MMBtu (compared to $4.00/MMBtu for Henry Hub). Prices in New England will likely settle at lower levels if temperatures come in warmer than normal as expected.”

WSI provides customized weather information to global commodity traders via its industry-leading WSI Trader Web site. WSI will issue its next seasonal outlook, including the first comprehensive look at winter, on October 22. 

About WSI Corporation
WSI (Weather Services International) and Weather Central are the world's leading providers of weather-driven business solutions for professionals in the energy, aviation, insurance and media markets, as well as multiple federal and state government agencies. Together they comprise the professional division of The Weather Company and are owned by a consortium made up of NBC Universal and the private equity firms, The Blackstone Group and Bain Capital.

About ESAI
Since its inception in 1984, Energy Security Analysis Inc. (ESAI) has been dedicated to monitoring, analyzing and synthesizing information about world-wide energy markets. Tapping the talents of its senior-level staff, ESAI provides clients with unparalleled insight into where the markets have been and where they are headed. ESAI provides ongoing systematic analysis of energy prices in the oil, natural gas and energy markets. For more information on ESAI services, see www.esai.com.

Media Contacts:
Linda Maynard, WSI
(978) 983-6715, lmaynard@wsi.com

Tommy Sutro, Energy Security Analysis, Inc.
(781) 245-2036, tsutro@esai.com