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.
