ESCO Advisors 2016 Summer Forecast

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ESCO Advisors 2016 Summer Forecast

2015/16 Winter Recap

Winter 2015/16 can best be summarized by the following statement from our Winter newsletter back in October 2015, “We foresee the northerly jet being contained in Canada more often than not, leading to above-average temperatures in the northern tier of the country. Please note that this does not mean that short-term colds spell can’t happen for a week or two.” More or less, that is what happened!!

Regarding specifics, as you can see from Figure 1, we believed the northern tier would be anomalously warm from November through March while the southern tier would be anomalously cooler than normal. Actual anomalies are shown in Figure 2. Overall, we were mostly correct on the anomalously warm temperatures (yellow, orange, and red) from the Plains through New England. However, we were not far enough south with our warmth as they actualized into the southern Plains and well into the Ohio Valley. The areas we thought were going to be anomalously cool, actualized closer to normal (as one degree on either side of zero is quite “normal” in my book).

As for why the southern “colder-than-normal” did not happen, the southern jet stream set up about 400 miles to the north of where we believed it would. That is why the northern Sierra Nevada Range received copious amounts of snow this winter while SoCal received only a modest amount of rain. With the more northerly track, the southern tier did not experience enough rain-cooled days to lower the average temperature to the extent we believed it would.

FIGURE 1

FIGURE 2

Summer 2016

We believe this summer (May-Sep) will likely be an anomalously warm season for the majority of the country. As you can see from Figure 3, we think the area from the central/southern Plains through the Ohio Valley will be much warmer than normal while the remaining locales east of the Rockies will just be slightly warmer than normal. As for the West, we are predicting a normal season regarding temperatures.

FIGURE 3

Soil moisture in most regions other than the West is back to normal levels at this time. Therefore, we predict that anomalous heat will be slow to build in areas east of the Rockies. As our loyal readers know, the air temperature does not really get cranking to anomalously high levels until soil moisture has been sufficiently evaporated. But, come July and August, look for soil moisture levels to be substantially diminished in the heart of the country and anomalous heat to take hold. Hence our very warm forecast from TX through the Ohio Valley and the northern Gulf Coast.

It is because of the dry conditions in much of the West that we went one category warmer in that region. Our analysis really shows an anomalously cool season for much of the West. But because of the extreme drought, we decided that would not be likely.

If we are to point out one geographical area at risk in our Summer forecast, that would have to be Texas. If this is a more active tropical season than those we have experienced the past few years (see our Tropical Outlook, below), we believe that the Gulf Coast, especially Texas, could be a bit cooler than we

currently project. This is especially true of south TX, the coast, and east TX. Of course, this is all dependent upon the trajectories of the individual storms.

 

Tropical Outlook

Normally, the Atlantic Basin (the Atlantic Ocean north of the Equator, Gulf of Mexico, and the Caribbean Sea) experiences an average of 11 named storms with 6 being hurricane strength and 2 of those being category 3 or greater, during the season that spans June 1 – November 30. For the 2016 Tropical Season, we are predicting a slightly below average year, but only in terms of total named storms. The number of hurricanes and major hurricanes should be normal. We are predicting 9 named storms, 6 hurricanes, and 2 major hurricanes. We do not believe that La Nina conditions will develop soon enough to drastically impact this tropical season. If Nina conditions do develop, we believe it will likely be towards the latter part of the tropical season, Oct/Nov.

As for landfall, we foresee more activity in the Gulf of Mexico than the East Coast (excluding FL). It would not surprise us if 4 storms make it inside the Gulf this season. That being said, the potential for volatility in the NG market could be high if this prognostication comes to fruition. This, in combination with reduced NG injections into storage because of use to meet summertime load, could translate into an interesting ride in the electricity market.

If we are correct in our forecasting, prudent and sound risk management will be the key to survival, success, and profitability.

 

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NOTE: ESCOWare® and ESCO Advisors™ provide this information as a courtesy to enhance the risk management process and are not responsible for the accuracy of this forecast and/or actions taken as a result of this forecast information.

To learn more about the ESCOWare® suite of software solutions, please contact Irv Lebovics at 203-456-1833 or visit www.escoadvisors.com.

 

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