WSI issues winter forecast for energy traders

Billerica, Mass.

WSI Corp. issued the winter forecast for the upcoming three-month period (December to February). WSI expects the period to be cooler-than-normal in the eastern third of the U.S., as well as in the southern and central plains (e.g., Phoenix, Denver, Dallas, Houston, Little Rock, Kansas City, Chicago, Detroit, Cincinnati, Atlanta, Cincinnati, Miami, Boston, New York, Washington D.C., and Philadelphia). Warmer-than-normal temperatures are expected in the west coast states and northern plains (e.g., Seattle, Portland, San Francisco, Sacramento, Los Angeles, Billings, Bismarck, and Minneapolis).

WSI expects the following monthly trends:

  • In December, cooler-than-normal temperatures are expected in the eastern half of the United States and in parts of the Southwest. The coldest temperature anomalies are expected in the Great Lakes and central and southern Plains. Warmer-than-normal temperatures are expected in the west coast states and northern Rockies, with the warmest anomalies in the Pacific
  • In January, below-normal temperatures are expected in most of the country, with the exception of the Pacific Northwest, northern Rockies, and northern Plains. The coolest temperatures, relative to normal, are expected in the central and southern Plains and the Southeast.
  • In February, the above-normal temperatures in the Pacific Northwest push southward all the way through California and Nevada and eastward across the northern tier of the nation. Significantly above normal temperatures are expected in the Pacific Northwest. Below-normal temperatures are expected from Colorado and New Mexico eastward and staying south of Iowa, Pennsylvania, and New Jersey. The coldest temperatures, relative to normal, are expected in the Gulf Coast states and Southeast.

According to WSI seasonal forecaster Dr. Todd Crawford, “CPC’s (Climate Prediction Center) outlook is similar to our forecast along the northern U.S. However, our forecast of below-normal temperatures in the central Plains and Ohio Valley differs from the above-normal forecast from CPC.”

WSI successfully predicted (1) a hot 2002 summer season, (2) a cold October 2002 across the northern United States, and (3) a cold November 2002 across the eastern half of the United States. Their three-month seasonal forecasts have been skillful for 8 out of the last 12 periods. A skillful seasonal forecast is defined as one that is closer to what is actually observed than a forecast using the 10-year average temperature.

WSI’s Energycast seasonal forecasts are now being issued using the trailing 10-year (1992-2001) average temperature as “normal”. This reflects the sentiment in the trading industry that the last 10 years are more reprehensive of future weather than the U.S. government standard 30-year fixed (1971-2000) averages.

WSI’s latest seasonal forecast indicates there will be appreciable heating demand in the Midwest, Plains, Northeast and Mid-Atlantic for most of the winter. That should increase regional electric power loads and gas demand, pushing prices up. If ESAI’s forecast of $5+ /MMBtu gas prices at Northeast gas hubs (Algonquin, Transco Zone 6 and Tetco M-3) holds, heavy fuel oil-fired steam turbines could become competitive with combined-cycle gas turbines and limit power price spikes in PJM, New England and New York. Above-normal temperatures in the West should keep regional electric power loads and gas demand moderate.

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