November Weather UPDATE —La Niña’s Back!

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Most Dallas, Texas electricity customers already know that because roughly 50% of Texas electricity generators use natural gas for fuel, it’s important to pay attention to natural gas prices. Last week’s cold weather also sent a shiver through the natural gas markets raising concerns about the winter forecast, natural gas supply, and possible rising natural gas prices.

On the weather side of things, this past fall had warmer than average temperatures until mid-October when conditions cooled and then turned colder — if not downright nippy as far south as Dallas, Texas by Halloween. For natural gas markets, the cold weather’s promise of higher prices was overshadowed by NOAA’s long lead forecast for the upcoming winter. NOAA had already forecasted a girdle of above-average temperatures sweeping from the southwest across Texas, the Gulf states and Florida, and on northwards up the Appalachians and the east coast towards New England. The below normal temperatures were huddled along states on the Canadian border and south of them, “equal chance” conditions. One unresolved factor was the chance for a La Niña to emerge in the beginning of 2018 that might bring colder conditions to northern states —thus creating more natural gas demand for heating and raise the price.

Recently, NOAA announced a La Niña Advisory stating that La Niña conditions were present in the Pacific Ocean. For the U.S., La Niñas bring cold, stormy weather to the northern tier of states, wet warm conditions to the Ohio Valley and mid-Atlantic region, and warm, dry weather to the southern states from the south west all the way to Florida. While that sounds dire news for heating bills, NOAA has cautioned that they expect this to be a weak La Niña so it might not be able to exert too much influence on weather conditions in North America.

As such, NOAA’s updated long range forecast is mostly unchanged, favoring above normal temperatures New England, mid-Atlantic, and the southeast. In particular, NOAA points out “the highest probabilities of warmer-than-normal temperatures are located across portions of the southwest and Texas.” Meanwhile, below-normal temperatures will keep the utmost northern tier of states in frigid conditions possibly until May.

One possibility for how winter consumption rates might effect price may come from an even trade off with the colder northern states consuming higher than average rates of natural gas for heat while all the other states in the above-average temperatures not consuming nearly as much. However, that depends on two things: the severity of the weather (ie —will the Polar Vortex stay leashed to the North Pole) and natural gas supplies.

The Glut Is Gone

On November 3, 2015, at the onset of what would be a record warm winter, stored supplies of natural gas were at a 5 year maximum, hitting 4,009 billion cubic feet (Bcf). Current stocks are only at 3772 Bcf, 101 Bcf less than the five-year average and 271 Bcf less than last year at this time.

One significant reason for the low storage is that the low price of natural gas encouraged development of natural gas-fired generators and cleared the way for liquid natural gas (LNG) exports. With prices low, producers began reducing the number of active rigs to cut their expenses —which cut into their production. Yet, within the past 8 months or so, both natural gas fired generators and LNG exports began to catch up with supply. So far this month, natural gas storage withdrawls are ahead over last year; a total of 18 Bcf during the first weeks of this year’s heating season versus last year’s net injections of 34 Bcf just during the second week of November.

Even with NOAA’s forecast for above average winter temperatures for much of the country, there’s still enough uncertainty about the what the weather will do and the amount of stockpiled natural gas to effect the futures contract prices. Some predict if the price rises above the psychological threshold of $3.42/MMBtu it could trigger price spiking. In places effected by constricted natural gas pipelines, that could add even more expense for those paying the local utility rate.

You Can Still Lower Your Bills!

There are plenty of ways customers in Dallas, Texas to reduce their heating costs this winter. Air sealing your home can save you up to 15% off your yearly energy bill. Adding more insulation to your attic can save you $600 a year (or more), depending on how much is already there.

But the BEST way to cut your monthly bill is to sign up for a long term fixed rate energy plan that will protect your family from rising rates. That can be a challenge — unless you compare Dallas electricity rates and plans at the one place that conveniently brings together information, ratings, and customer reviews. Shopping at State Electricity Ratings provides all the resources to help customers find the best electricity plans that fit their needs.

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