WSI Energycast Outlook Calls for Cool Period in Plains, warm along East Coast

The monthly breakdown follows:

In August:

• Northeast – Warmer-than-normal, with exception of New England and NY
• Southeast – Warmer-than-normal, especially GA/AL/FL
• N Central – Cooler-than-normal
• S Central – Warmer-than-normal in TX, cooler-than-normal in OK/KS
• Northwest – Warmer-than-normal, with exception of northern CA coast
• Southwest – Warmer-than-normal, with exception of southern CA coast

Effects in the Marketplace
WSI’s forecast indicates warmer-than-normal temperatures in August for most regions. However, New England, northern New York and the North Central states will be cooler-than-normal as will the coastal California regions. While the warmer outlook for the Southern and Western states is bullish for gas consumption in August, the cooler outlook for the heavily populated Northeast and California areas should offset the higher consumption areas. Gas consumption should be neutral and should not detrimentally impact expected injections to storage. Cooler temperatures in the key electric markets of New York, New England and California is bearish for prices as high cost units should spend less time on the margin setting price.

In September:

• Northeast – Warmer-than-normal
• Southeast – Warmer-than-normal, especially GA/AL/FL/SC
• N Central – Cooler-than-normal, especially NE/IA
• S Central – Cooler-than-normal, with exception of TX
• Northwest – Warmer-than-normal, with exception of northern CA coast
• Southwest – Warmer-than-normal, with exception of southern CA coast

Effects in the Marketplace
WSI’s forecast indicates warmer-than-normal temperatures in September will continue in the Southeast and Western states, particularly in the Southeast. Cooler-than-normal weather in the North Central and Plains states will dampen overall gas demand in September, possibly leading to a softening of gas prices. The likelihood of major heat events in September in the Northeast and California appears lower and power prices in these regions should be moderate as a result.

In October:

• Northeast – Warmer-than-normal
• Southeast – Warmer-than-normal
• N Central – Much cooler-than-normal
• S Central – Cooler-than-normal
• Northwest – Warmer-than-normal, with exception of ID
• Southwest – Warmer-than-normal, with exception of UT/CO

Effects in the Marketplace
WSI’s forecast for October indicates cooler-than-normal temperatures in the North Central and Plains states including Texas. October is a shoulder month and variations in weather have much less impact on the moderate demand for natural gas and power. If temperatures are much cooler-than-normal in late October, some early season natural gas demand could kick in which would only be bullish if inventory builds were lagging expectations.

According to WSI seasonal forecaster Dr. Todd Crawford, “We expect the bulk of the cool air to remain over the Plains during the August-October period, with the warmest temperatures in the Pacific Northwest and the Southeast. October itself looks to be the coolest of the three months, relative to normal, over the northern and central Plains.”

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 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 August-October will be issued on July 29, with the next new forecast package (for September-November) issued to clients on August 17 and to the press on August 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.