WSI Energycast Outlook Calls for Warm Period in West and Southeast, Cool Northeast

The monthly breakdown follows:

In July:

• Northeast – Warmer than normal, except for coastal New England
• Southeast – Warmer than normal, especially Mississippi
• N Central – Cooler than normal, especially ND/SD/MN
• S Central – Warmer than normal, especially TS/OK
• Northwest – Warmer than normal, except for ID/MT
• Southwest – Warmer than normal, except for UT/CO

Effects in the Marketplace (written by ESAI)
WSI’s forecast for July indicates warmer-than-normal temperatures in all regions with the exception of the North Central states. The trend toward higher temperatures will increase electric loads such that demand in these areas should be consistently higher, providing bullish conditions for power prices as marginal costs increase to meet higher loads. An increased likelihood of major heat events results from the warmer outlooks for these areas. The power sector is increasingly relying on natural gas to meet growing summer load demand. Higher loads with warmer temperatures will increase gas demand and provide a bullish backdrop for natural gas prices as the injection rate to storage may slow. Cooler temperatures in the North Central states will not provide much a significant offset to higher gas demand in the other regions.

In August:

• Northeast – Warmer than normal
• Southeast – Warmer than normal
• N Central – Warmer than normal, especially MN/SD/ND
• S Central – Warmer than normal, except for OK/KS
• Northwest – Warmer than normal
• Southwest – Warmer than normal, especially NV/CA

Effects in the Marketplace (written by ESAI)
WSI’s forecast for August indicates warmer-than-normal temperatures in all regions. Electricity demand will be higher than normal in most regions and the increased use of high cost peaking units in many areas will be very bullish for power prices. Natural gas demand will continue to be strong with most regions depending on gas fired units for summer peak conditions. Slow injections of gas to storage in both July and August will be bullish for the market. Of particular concern in August would be the stress on mid-level and peaking units due to the extended operations during hot weather. Forced outage rates tend to increase as time goes on during a long hot summer or towards the end of a prolonged heat event. These outages can exacerbate an already bullish market situation. Particularly warm temperatures in the Northwest could have an impact on hydro availability and increase the use of gas in California markets which would increase gas demand in that region and would be bullish for power prices.

In September:

• Northeast – Cooler than normal, especially PA/NJ
• Southeast – Cooler than normal, except for FL
• N Central – Warmer than normal, except for WI/IL
• S Central – Cooler than normal, except for TX
• Northwest – Warmer than normal
• Southwest – Warmer than normal

Effects in the Marketplace (written by ESAI)
According to WSI seasonal forecaster Dr. Todd Crawford, “July and August should be relatively warm in most of the US, with the exception of the north-central states, before very cool weather settles into the East in September. The strongest indications for heat, relative to normal, are across the South, while the Northeast should experience much more variable weather this summer, with numerous hot spells broken by extended stretches of cool weather.”

WSI successfully predicted (1) the sharp transition to warm weather over the eastern US in June 2005, (2) the cold and snowy winter of 2004-05 in the Northeast, and (3) the mild November 2004 in the northern 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 July-September will be issued on June 30, with the next new forecast package (for August-October) issued to clients on July 19 and to the press on July 26.

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.