WSI Expects Hot Summer to Transition into Very Warm Fall

Focus of Warmth Will Shift from Southern Plains to Northern Plains and Northeast by October


Andover, MA, July 26, 2011 — WSI (Weather Services International) expects the upcoming summer period (August-October) to average cooler than normal in the Pacific Coast states and Florida, with significantly above-normal temperatures expected elsewhere, especially from the southwestern US and Rockies across to the southern and central Plains. The WSI seasonal outlooks reference a standard 30-year normal (1971-2000).

“The summer heat has been more impressive and widespread than anticipated so far,” said WSI Chief Meteorologist Dr. Todd Crawford. “The extreme drought across the southern Plains has resulted in record heat in that part of the country. The drought has also acted to anchor the heat across much of the eastern two-thirds of the country, while the West has remained relatively cool, so far. We don’t foresee a significant change in pattern for the remainder of the summer, although the focus of the heat may shift slightly farther to the west in August. As we progress into fall, the pattern will generally be driven by the northern Pacific Ocean signal, which strongly argues for very warm temperatures across much of the eastern two-thirds of the US, especially in the north-central and northeastern states. For the August-October period as a whole, we are forecasting 587 population-weighted cooling-degree days. This is much higher than the 1971-2000 average of 498, but slightly lower than last year’s extreme value of 603.”

In August, WSI predicts regional temperature anomalies as follows:

Northeast* – Warmer than normal
Southeast* – Warmer than normal, except Florida
N Central* – Warmer than normal
S Central* – Warmer than normal
Northwest* – Cooler than normal
Southwest* – Warmer than normal, except coastal CA

According to Chris Kostas, Senior Power and Gas Analyst at ESAI, “With natural gas inventories running 7.7% below last year’s level (and 2.0% below the 5-year average) through mid July, the forecast for warmer-than-normal temperatures over most of the country in August will make it difficult for inventories to close the gap. Cooler-than-normal temperatures expected along the Pacific Coast and in Florida won’t be enough to offset the bullish underpinnings expected from the rest of the country. Increased gas demand from ERCOT, MISO, New York, New England and PJM should keep natural gas prices firm, despite the huge increases in year-over-year gas production. A marginal increase in gas prices would help dark spreads, however, and would increase the capacity factors of marginal coal-fired power plants. This phenomenon should keep gas prices from advancing significantly,” Kostas added. “The large spread between natural gas and fuel oil, however, could send power prices soaring in load pockets of eastern PJM and New York City during hot periods, even if oil-fired generation is called on for a limited number of hours during the month. Implied market heat rates and power prices are likely to remain firm in those power pools in August as a result of the heat, with the largest effects likely to be felt in ERCOT and PJM.”

In September, WSI sees the monthly breakdown as:

Northeast – Warmer than normal
Southeast – Warmer than normal, except Florida
N Central – Warmer than normal
S Central – Warmer than normal
Northwest – Cooler than normal
Southwest – Warmer than normal, except coastal CA

“Natural gas prices are likely to remain relatively firm in September, considering the warmer-than-normal temperatures that are expected to remain in place over most of the country. With Florida and the Pacific Coast expected to be the only cooler-than-normal regions, aggregate natural gas demand (and gas prices) should remain firm as inventories continue to play catch up. Implied market heat rates and power prices in ERCOT, MISO, PJM, New York and New England should run high in September, as above-normal power demand combines with the beginning of the generator maintenance period to push prices up the supply curve. Power prices in California and Florida are likely to be spared from the higher implied market heat rates seen east of the Mississippi, as cooler-than-normal temperatures combine with seasonal decreases in weather-related demand,” added Kostas.

In October, WSI forecasts:

Northeast – Warmer than normal
Southeast – Warmer than normal, except Florida
N Central – Warmer than normal
S Central – Warmer than normal
Northwest – Cooler than normal
Southwest – Warmer than normal, except coastal CA

Kostas further noted, “While cooling demand tapers off significantly in October, the generator maintenance period typically takes a great deal of generation offline. Even a minor increase in weather-related demand could have a meaningful effect on heat rates as a result. With warmer-than-normal temperatures expected in ERCOT, MISO, PJM, New York and New England in October, increased power demand and the onset of the generation maintenance period should keep gas demand firm. Implied market heat rates and power prices are also likely to be firm on marginal late-season cooling demand. With a much warmer-than-normal August to October period expected for most of the country, we now expect inventory levels to have trouble challenging last year’s record 3,840 Bcf by the end of the injection season. Natural gas prices are also unlikely to collapse significantly in October due to the much warmer-than-normal temperatures that are expected this summer. Cooler-than-normal temperatures in California and Florida should keep implied market heat rates and power prices stable and subdued in October.”

WSI, which provides customized weather information to energy traders, will issue its next seasonal outlook on August 23.

*To view the map defining WSI’s US regions, click here.

About WSI
WSI (Weather Services International) is the world's leading provider of weather-driven business solutions for professionals in the energy, aviation, and media markets, and multiple federal and state government agencies. WSI is a member of The Weather Channel Companies and is headquartered in Andover, Massachusetts with offices in Birmingham, England. The Weather Channel Companies 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.

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

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

Editorial Contact:
Barbara Rudolph
Rudolph Communications, LLC
(781) 229-1811
bjr@rudolphcommunications.com