Gas Weather Outlook

About Gas Weather Outlook

The Gas Weather Outlook (GWO), produced jointly by PIRA and MDA EarthSat, combines the weather forecasting expertise of MDA EarthSat with PIRA's renowned energy fundamentals analysis. GWO is distributed each business day to provide timely updates of PIRA’s forecasts for EIA storage data together with projections of heating and cooling degree days two weeks into the future and a related discussion of issues behind changing weather patterns. In addition, GWO issues a comprehensive weekly forecast of supply/demand balances along with a regional breakdown of anticipated storage changes in future EIA storage reports.

GWO gives subscribers insightful analysis of the interactions between cooling/heating demand and changes in working gas storage, which are crucial in any assessment of short-term gas markets.

In sum, GWO provides subscribers invaluable insights into the dynamics of the various supply and demand components of the gas market, as well as their interaction with the changes in heating and cooling load.

Key Features of Gas Weather Outlook

With an easy-to-follow daily report — which combines the respective strengths of PIRA and MDA — GWO subscribers get:

  • Insightful analysis of the interactions between cooling/heating demand and changes in working gas storage, which are crucial in any assessment of short-term gas markets.
  • Invaluable insights into the dynamics of the various supply and demand components of the gas market, as well as their interaction with the changes in heating and cooling load.

The GWO Deliverables 

The Gas Weather Outlook is a daily emailed (and online) report, structured as follows:

Every business day: A one-page data-and-text recap that includes heating/cooling degree-day forecasts for the current and coming weeks, a prior-year weather comparison, a 10-year-normal weather comparison, and a daily discussion of short- and medium-term weather outlooks along with weather maps. It also shows weekly storage levels and changes from the previous day’s number and a comparison with the previous year’s storage changes and levels.

Every Tuesday: In addition to the one-page report, a three-page supplemental overview includes daily HDDs/CDDs of the prior week and a daily forecast for the week in progress, along with a brief discussion of PIRA’s storage outlook and a detailed breakdown of recent and forecast storage changes and overall storage levels by region. The U.S. is broken down into the EIA regions of Consuming East, Consuming West, and Producing Area. In addition, the report includes an extensive breakdown of PIRA’s estimates for domestic production, net trade, R/C heating demand, EG gas burn demand, and industrial/other demand for the past week and forecasts of gas balances for the week in progress.

GWO's Data Sources, Approach & Methodology

GWO’s foundation is the unique and powerful combination of two companies that are each a leader in their respective fields.

MDA EarthSat's Contribution

Data Gathering and Processing: The strong correlation between temperature and energy demand requires that accurate and timely instrument data be fed into the GWO process. MDA EarthSat focuses on the 200 primary, first-order weather stations in the continental United States. Data are collected hourly from these stations via a NOAAPORT satellite receiver, as well as through direct feeds from the National Weather Service. Data for nearly 1,000 other stations are stored and utilized to offset missing or erroneous data in the primary 200 locations. (MDA EarthSat’s quality-control data cleaning processes have earned it its position as the primary scorekeeper in the weather derivatives industry.) Temperature data are then converted to a national demand number by using a combination of population and natural gas consumption weighting. All in all, a significant quantity of weather data are received, analyzed, and stored for the GWO. Gas consumption-weighted temperature data are converted to degree days for translation by PIRA into a weekly storage forecast.

Forecasting: To understand the future price implications of weekly gas storage reports, a gas market analyst must understand the weather-adjusted dynamics behind historical weekly storage changes.  The next step involves forecasting future weekly storage changes.  MDA EarthSat’s team of experienced energy-weather meteorologists analyzes several weather models to create top-line temperature and degree-day forecasts. Models from the European weather service offices, the NWS, Environment Canada, the U.S. Navy, and other international sources are used to create the latest one- and two-week forward forecasts. The latest weather forecast is constantly piped to PIRA for daily updates on the future storage implications of changes in weather expectations.

PIRA’s Contribution

Forecasting: Using MDA EarthSat’s degree-day forecasts, PIRA generates forward projections of weekly storage changes reported by the EIA. PIRA uses extensive market intelligence, proprietary pipeline scrapes, and data collection to forecast gas supply/demand components required to determine those weekly storage changes divided among the Consuming East, the Producing Area, and the Consuming West (in line with the EIA’s regional definitions).

On each Tuesday, ahead of EIA’s Thursday storage data release, PIRA discusses key factors behind expected shifts in working gas storage and details the individual supply/demand component of those balances. To do so, PIRA takes into account the impacts on daily gas balances of: 1) closely monitored LNG, Mexican, and Canadian gas imports/exports; 2) gas demand for electricity generation (EG) and from the industrial sector, adjusted for anomalies such as major holidays; and 3) domestic gas production, incorporating PIRA’s industry-leading models and daily nomination data from our pipeline scrapes, adjusted for anomalies such as hurricane-related shut-ins.

The focus of weather data varies seasonally from a gas demand standpoint.  From October into May, PIRA links MDA EarthSat forecasts of heating degree days (HDDs) with PIRA’s latest heating load coefficients to project gas heating demand.  These projections are updated each business day to reflect the impact of fast-changing HDD conditions on demand.

From May through September, PIRA links its proprietary EG grid model simulations with MDA EarthSat forecasts of cooling degree days (CDDs) to project U.S. electricity supply and demand. PIRA’s model then determines the changing primary energy mix for EG between natural gas, fuel oil, and other primary energy sources for each major power grid — the Eastern Grid, the Western Grid, and ERCOT.  The end result is a gas storage forecast that is firmly guided by the season’s overriding weather fundamentals.

Fees

PIRA Retainer Clients and MDA clients may subscribe to GWO under discounted terms, which are determined by the scope of their license. For prices, please contact your PIRA Account Executive or MDA.