WSI Energycast Outlook Calls for Cool Weather in North-Central, Northeast US

The monthly breakdown follows:

In May:

• Northeast – Cooler than normal
• Southeast – Warmer than normal, especially GA/AL
• N Central – Cooler than normal, especially ND/SD/IA
• S Central – Warmer than normal, with the exception of OK
• Northwest – Warmer than normal
• Southwest – Warmer than normal, especially NV/AZ

Effects in the Marketplace (written by ESAI)
WSI’s forecast for May indicates cooler-than-normal temperatures in the Northeast and North Central states. However, the Southeast and parts of the Southwest are forecast to experience significantly warmer-than-normal temperatures. While gas and power demand for May is typically low, unseasonably hot weather can push electrical demand to near summer levels at a time when generator maintenance season is still underway. Power prices in the Southeast and Southwest could be very bullish during an early season heat event due to the maintenance outages. Natural gas has started the injection season ahead of the five year average and cooler weather in the northern areas should delay air conditioning demand, which will lower power sector gas demand and offset potentially higher power sector gas demand in the Southeast and Southwest.

In June:

• Northeast – Cooler than normal
• Southeast – Warmer than normal
• N Central – Warmer than normal
• S Central – Cooler than normal
• Northwest – Warmer than normal
• Southwest – Warmer than normal

Effects in the Marketplace (written by ESAI)
WSI’s forecast for June indicates cooler-than-normal temperatures in the Northeast and South Central markets. The early season cool weather should moderate power sector demand for natural gas and allow injections to continue at a normal to above normal rate. This will have a moderating influence on natural gas prices. Moderately warmer-than-normal temperature expectations in other markets during June should not have a significantly bullish impact on power prices, although a slight increase in the chance for a heat event provides for some increased price volatility.

In July:

• Northeast – Warmer than normal, with exception of NH/ME/MA/RI
• Southeast – Warmer than normal, especially GA/FL
• N Central – Cooler than normal, especially ND/MN
• S Central – Warmer than normal, with exception of OK
• Northwest – Cooler than normal, especially ID
• Southwest – Warmer than normal, especially NV

Effects in the Marketplace (written by ESAI)
WSI’s July forecast indicates warmer-than-normal temperatures in the key consuming areas for summer cooling demand – the Southeast, Southwest, South Central and the Northeast. A higher temperature outlook for these areas in July means increased peak load demand patterns and an increased potential for extended heat events. These heat events not only increase demand for cooling but they also stress mid-level units by requiring extended operations. This provides for an increased rate of forced outages, which is an additional bullish factor. Natural gas prices will have a bullish underpinning during hot weather despite higher inventories that are likely by July. Cooler temperatures in the Northwest and North Central states will not provide much offset to higher gas demand in the other regions.

According to WSI seasonal forecaster Dr. Todd Crawford, “Our latest forecast models indicate that the cool weather will be the rule across the northern tier, while some significant heat may build in the Southeast by July.”

WSI successfully predicted (1) the cold and snowy winter of 2004-05 in the Northeast, (2) the mild November 2004 in the northern US, and (3) the unusually cold January 2004 in much of the eastern US. Their three-month seasonal forecasts have been skillful for 8 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 May-July will be issued on April 28, with the next new forecast package (for June-August) issued to clients on May 17 and to the press on May 24.

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.