What If It Isn't Normal? Winter Weather Sensitivities

To complement CERA's normal weather outlook for winter 2006/07, we estimate the impact of a colder-than-normal and a warmer-than-normal winter on natural gas demand, storage, and prices, using two recent weather patterns. The cold weather is based on winter 2000/01 with 11 percent more heating degree-days (HDDs), the coldest in the past 20 years. The warm winter uses winter 1999/2000 with 10 percent fewer HDDs, the second warmest in the past 20 years.

Under normal weather CERA expects average winter prices of $6.08 per million British thermal units (MMBtu) and end-March storage inventories of 1,588 billion cubic feet (Bcf). Although lower than March 2006, this level will still be the second highest March-ending inventory on record and 624 Bcf higher than the five-year average.
* CERA estimates that a colder-than-normal winter will increase demand by an average of 5.5 Bcf per day, decreasing end-March storage to 764 Bcf, only 34 Bcf above the record minimum level. CERA expects winter prices would average $9.39 per MMBtu. Summer 2007 storage injection demand would increase by an average of almost 4 Bcf per day above our normal weather outlook, putting upward pressure on prices next summer.
* In a warmer-than-normal winter, CERA estimates that demand would decrease by an average 4 Bcf per day, with end-March inventories at a record at 2,194 Bcf. Under this scenario winter prices average $4.46 per MMBtu. Summer 2007 storage injection demand would decrease by an average of almost 3 Bcf per day below our normal weather outlook, putting downward pressure on gas prices next summer.

CERA Research Reports

Browse other CERA research reports:

Oil Reports
Power Reports
Gas Reports
Energy Technology Reports

About CERA

CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.