It’s official.  Winter is over today and we will start astronomical Spring 2012 tomorrow on March 20th.   As many of you know, it’s been an unusual and very warm winter this year.  In fact, many of you folks in the Midwest/East probably felt like “Winter” never came.  For some folks out West…”Winter” finally came over the weekend in terms of “snow” in the Mountains..especially in Northern California.  Too little too late.

The US overall had the 4^th warmest winter on record and 3^rd least snowy on record according to NOAA.  Meanwhile out West…it’s been dry and near normal in temperature overall.  California had it’s 2nd driest winter on record.   The only two states that were below average in temperature were New Mexico and Alaska.  Boston and New York City had their 2^nd warmest winter on record.  March is shaping up to the warmest on record in the US, too.   You get the picture. Does this pattern of unusual weather mean anything for what we can expect going forward?  Let’s turn our focus to forecasting the weather for Summer 2012 and it’s implications on the energy markets.

As I mentioned in my previous post, “Let’s talk Energy Market Fundamentals, Part 2” NYMEX Natural Gas price is getting crushed due to the very mild Winter we’ve experienced in addition to a major supply glut of Natural gas in storage.  Traders would have also told you “Winter” was over a long time ago..probably beginning in Mid January.   If the Summer ends up being milder than average…it could make for a very nasty situation in the Natural Gas storage market and for Natural Gas prices too.

With the very unusually warm start to 2012, I’ve only seen a couple of top energy vendor forecasts and most are more or less in agreement on Summer overall.  FYI… “Summer” in the trading markets is defined as June, July, and August as “Winter” is defined as Dec, Jan, Feb.  They are all pretty confident calling for a warmer than average Texas…a near to weakly above normal East, and a variable Midwest with near normal northern areas and weakly above southern areas of the Midwest.

For the west, pretty confident most vendors will lean cooler than average west coast, and warmer interior, especially Desert SW and Interior NW.  Some major vendors, like WSI, have not issued their official Summer outlook as of yet.

Energy mets will be watching the strength of La Nina going forward along with forecasts of major tele connections.  Most vendors will begin to run analogs of a record scorching March and warm Winter this year and see what the Summer looked like in certain analog years.   Some vendors mention the possibility of La Nina staying in weak La Nina/Enso-neutral territory through early Summer.  Others believe we could possibly head towards Enso neutral by early Summer and even towards a weak El Nino by the end of the Summer.   Where do you think we’ll end up?

If you’re interested in hearing more about the vendor Summer forecasts and their reasoning about it, you should definitely attend Earth Networks 7^th Annual Energy Weather seminar in Houston.   You’ll also get to hear from my friends at Earth Risk Technologies who say their product,“Temp Risk” was able to correctly forecast the unusually warm Winter far in advance.   Pretty awesome and am looking forward to hearing that presentation too!

From a trading perspective, I think Nat Gas traders are pretty confident that this Summer won’t compare to last Summer’s blistering heat and record setting heat waves…especially in Texas.  And I would tend to agree.

Expectations are super high for Nat Gas traders.  There needs to be durable heat waves in the Midwest/East and/or CAT5 hurricanes slamming the Gulf of Mexico Nat Gas facilities in higher frequency during the Summer.  Also, Colorado state is a major driver of “perception” for hurricane forecasting and they have delayed any quantitative hurricane forecasts until April 4^th 2012.

In regards to Summer…in my opinion the markets have already priced in a cooler Summer this year compared to last year (and given current Vendor forecasts for Summer),  traders will continue to be bearish on Nat Gas prices during withdrawal season.

We will wait to hear of any major changes/updates in Vendor forecasts…especially if any of them put much above’s in the forecast for the populated regions of the Midwest/East.  In my opinion, it’s not likely to happen until we’re quite close to Summer.

Remember, major weather vendors do move the market…especially when issuing Summer/Winter outlooks/updates by putting the perception out there in the market.   If the vendors stick to the “normal to weakly above normal” temperatures in their updates for the Midwest/East…then I think Nat Gas prices will continue to remain bearish (with supply overweighing sentiment) until we get closer to Summer.

What do you think Summer of 2012 will look like?