WSI Energycast Outlook Calls for Warm August in US, Cool Sept/Oct in Northeast

The monthly breakdown follows:

In August:

• Northeast – Warmer than normal
• Southeast – Warmer than normal, especially Mississippi
• N Central – Warmer than normal, especially ND/MN
• S Central – Warmer than normal, especially TX
• Northwest – Warmer than normal, especially WA/OR
• Southwest – Warmer than normal

Expected Market Impact (provided by ESAI)
WSI’s August forecast indicates warmer-than-normal temperatures in all regions. Above-normal temperatures will be more severe in the western states, particularly in the Northwest. Higher temperatures in July have been pushing peak loads to record highs in many areas of the country and the current WSI outlook indicates that periods of hot weather and very high load conditions will continue into August. Higher temperatures and loads will be bullish for electric prices as higher cost units are required to meet loads during peak days, according to Paul Flemming of ESAI. With an increased likelihood of major heat events results due to the warmer outlook, there is a concern that generator failures may be more prevalent in August after going through extended operations in July. Higher power sector demand for gas will also result from the warmer weather. Injections to storage have been running slightly below the five-year average, although total storage levels are quite high for July. Higher temperatures in August will extend the trend of lower than normal injections to storage.

In September:

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

Expected Market Impact (provided by ESAI)
WSI’s forecast for September indicates slightly warmer-than-normal temperatures in most regions. New England temperatures will be cooler than normal and temperatures in the North Central region will be warmer than normal. September weather can be an extension of August or can reflect the beginning of the shoulder period demand. With cooler weather in the Northeast, electric loads will be lighter and the likelihood of a late season heat event diminishes. This will be bearish for power prices in the Northeast. Gas demand from the power sector should ease during September and allow for higher injections to storage. This may result in lower prices for natural gas, especially if storage levels look to reach maximum capacity well before the end of October.

In October:

• Northeast – Cooler than normal
• Southeast – Cooler than normal
• N Central – Cooler than normal
• S Central – Cooler than normal
• Northwest – Warmer than normal, except for ID
• Southwest – Warmer than normal

Expected Market Impact (provided by ESAI)
WSI’s October forecast indicates cooler-than-normal temperatures in the eastern and south-central regions. Temperatures in most parts of the country are moderate during October and variances from normal have much less impact. The cooler-than-normal outlook in the eastern areas means that electric loads will be lower during the peak of the maintenance season. The impact of generator maintenance outages should be less pronounced under lower load conditions. The cooler outlook could lower injections of natural gas to storage towards the end of the month as heating demand could kick in early.

According to WSI seasonal forecaster Dr. Todd Crawford, “August should be another warm month across the US, especially in the South. Our models indicate a sharp transition to cooler weather in the East by late September and October, however.”

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 August-October will be issued on July 28, with the next new forecast package (for September-November) issued to clients on August 16 and to the press on August 23.

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.