WSI Energycast Outlook Calls for Cold Period in Southern US, Warm in Northern US

The monthly breakdown follows:

In February:

• Northeast – Warmer than normal
• Southeast – Cooler than normal, especially FL/GA/SC
• N Central – Warmer than normal, especially ND/MN
• S Central – Cooler than normal
• Northwest – Warmer than normal, especially ID/MT
• Southwest – Cooler than normal, with exception of CA

Effects in the Marketplace
WSI’s forecast for February indicates warmer-than-normal temperatures in the Northeast, Northwest and North Central states. The warmer weather will moderate gas demand from these high demand critical areas and will be moderately bearish for prices. Natural gas pipeline constraints remain an issue in the Northeast during extreme cold weather. Heating oil demand is dominated by the Northeast where the warmer-than-normal temperature outlook should have a bearish impact on demand and price. Across the country, the southern states will experience cooler-than-normal temperatures but the impact on overall gas demand should not be significant.

In March:

• Northeast – Warmer than normal, especially NY
• Southeast – Cooler than normal, especially GA/FL
• N Central – Warmer than normal, especially ND/MN/WI/MI
• S Central – Warmer than normal, especially TX/OK
• Northwest – Warmer than normal, especially WA/OR
• Southwest – Cooler than normal, with the exception of AZ/NM

Effects in the Marketplace
WSI’s forecast for March indicates warmer-than-normal temperatures throughout the U.S. with the exception of the Southwest and Southeast states. The warmer outlook in the northern gas demand areas should provide the market with a lower demand outlook for March and an easing of supply concerns that should ultimately provide a bearish price fundamental price signal, especially when combined with the warmer February outlook. In March, electrical loads will begin to moderate seasonally and power prices should ease due to lower loads and potentially lower fuel prices.

In April:

• Northeast – Warmer than normal, especially NY
• Southeast – Cooler than normal
• N Central – Cooler than normal, especially NE/IA/SD
• S Central – Cooler than normal, especially OK/KS
• Northwest – Warmer than normal, with exception of ID
• Southwest – Warmer than normal

Effects in the Marketplace
WSI’s forecast for April indicates warmer-than-normal temperatures in the Northeast and western U.S. April is a shoulder month for both natural gas and power demand. With generally lower loads, power prices are not as responsive to the more moderate changes in weather. Generator maintenance programs and nuclear outages will have a greater impact on power prices than weather in most markets.

According to WSI seasonal forecaster Dr. Todd Crawford, “Our latest forecast models indicate that the rest of the winter and early spring will be characterized by relatively warm temperatures across the northern half of the US. Any below-normal temperatures will be confined to the southern US.”

WSI successfully predicted (1) the mild November 2004 in the northern US, (2) the unusually cold January 2004 in much of the eastern US, and (3) a cool 2003 summer in the Southeast and mid-Atlantic. Their three-month seasonal forecasts have been skillful for 7 out of the last 12 periods. A skillful seasonal forecast is defined as one that is closer to what is actually observed than a forecast using the 30-year average temperature.

WSI, which provides customized weather information to energy traders, issues its Seasonal Outlook twice monthly. The next forecast update for February-April will be issued on January 27, with the next new forecast package (for March-May) issued to clients on February 15 and to the press on February 22.

About WSI
WSI Corporation is the world's leading provider of weather-driven business solutions for professionals in the energy, aviation, and media markets, and multiple federal and state government agencies. WSI is headquartered in Andover, Massachusetts with offices in Birmingham, England, and is a wholly owned subsidiary of Landmark Communications. More information about WSI can be found at www.wsienergycast.com.

About ESAI
Since its inception in 1984, Energy Security Analysis Inc. (ESAI) has been dedicated to monitoring, analyzing, and synthesizing information about world-wide energy markets. Tapping the talents of its senior-level staff, ESAI provides clients with unparalleled insight into where the markets have been and where they are headed. ESAI provides ongoing systematic analysis of energy prices in the oil, natural gas, and energy markets. For more information on ESAI services, see www.esai.com.