WSI Energycast Outlook Calls for Warm Summer in most of Eastern US

The monthly breakdown follows:
In July:

• Northeast – Warmer-than-normal
• Southeast – Warmer-than-normal, especially GA/NC/SC/VA
• N Central – Cooler-than-normal
• S Central – Warmer-than-normal, except for cooler-than-normal in OK/KS
• Northwest – Warmer-than-normal
• Southwest – Warmer-than-normal

Effects in the Marketplace
WSI’s forecast indicates warmer-than-normal temperatures in July for most regions with the exception of the north-central states. This is could prove to be bullish for gas prices as summer demand could slow the pace of injections to inventory. Any increase in gas prices will translate into higher power prices in most areas as higher loads increase the operating factors of both gas fired CCGTs and peakers.

In August:

• Northeast – Warmer-than-normal, especially MD/PA/NJ
• Southeast – Warmer-than-normal, especially GA/NC/SC/VA
• N Central – Cooler-than-normal, except for warmer-than-normal in ND
• S Central – Cooler-than-normal, except for warmer-than-normal in TX
• Northwest – Warmer-than-normal, especially WA/OR/ID
• Southwest – Warmer-than-normal, especially NV/AZ/UT

Effects in the Marketplace
WSI’s forecast indicates warmer-than-normal temperatures in August on the East and West Coasts. The continuance of the warmer-than-normal forecast into August increases the likelihood of generator failures that would have bullish impacts on power prices. The cooler-than-normal forecasts in much of the central US may dampen the increased demand seen for natural gas in other regions.

In September:

• Northeast – Warmer-than-normal, especially PA/NJ
• Southeast – Warmer-than-normal
• N Central – Cooler-than-normal
• S Central – Warmer-than-normal, except for cooler-than-normal in OK/KS
• Northwest – Warmer-than-normal
• Southwest – Warmer-than-normal, especially NV/AZ/UT

Effects in the Marketplace
WSI’s forecast for September also indicates warmer-than-normal temperatures in all regions with the exception of the north central states. As the warmer-than-normal outlook extends into September, the natural gas injections to storage will be watched closely. Warmer-than-normal weather in September could mean continued summer like demand for both gas and power. This would be bullish for prices in September and would increase winter supply concerns due to increased uncertainty of meeting inventory targets.

According to WSI seasonal forecaster Dr. Todd Crawford, “We continue to expect a warm late summer period in most of the major population centers in the East, along with another hot summer in the West. We now think most of the northern and central Plains will remain relatively cool this period, however.”

WSI successfully predicted (1) the unusually cold January 2004 in much of the eastern US, (2) a cool 2003 summer in the Southeast and mid-Atlantic, and (3) a cold ‘02-‘03 winter in the Southeast. 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 June-August will be issued on June 24, with the next new forecast package (for August-October) issued to clients on July 13 and to the press on July 20.

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.