WSI Energycast Outlook Calls for Warm Period in East, Cool in Northwest

The monthly breakdown follows:

In October:

• Northeast – Warmer than normal
• Southeast – Cooler than normal
• N Central – Cooler than normal
• S Central – Cooler than normal
• Northwest – Warmer than normal, except ID/MT
• Southwest – Warmer than normal, especially AZ/NM

Expected Market Impact (provided by ESAI)
WSI’s October forecast indicates cooler-than-normal temperatures in the Central and Southeast regions. Some early-season heating demand for natural gas could develop for the North Central region, however, warmer-than-normal temperatures in the New York and New England regions will offset this demand. October is a low-demand month for both power and gas, therefore temperature variances from normal have relatively low price impacts. Electric loads should be low during the peak of the maintenance season in the second half of October. However, late season warm weather can cause higher loads to occur at a time when generator outages are high. The probability of this occurring is greater with the warmer-than-normal forecast in the Northeast. Injections of natural gas should be higher during October, but the return of natural gas production due to Katrina is still questionable.

In November:

• Northeast – Warmer than normal
• Southeast – Warmer than normal
• N Central – Warmer than normal
• S Central – Warmer than normal, except for western TX/OK/KS
• Northwest – Cooler than normal, especially WA
• Southwest – Cooler than normal, especially NV/UT

Expected Market Impact (provided by ESAI)
The WSI November forecast indicates warmer-than-normal temperatures in all regions except for the Southwest and Northwest. This indicates that we may see a delay in the start of the heating season, which will allow more time for injections to storage. ESAI’s storage projections indicate that the 3.1 Tcf storage target will not be reached by the end of October. If October injections are strong and injections continue into mid-November, then the 3.1 Tcf target may be reached. This would take some of the bullish uncertainty out of the market. In the oil markets, heating oil inventories are at very high levels, and the warmer-than-normal November outlook should help to moderate heating oil prices.

In December:

• Northeast – Warmer than normal, especially ME
• Southeast – Warmer than normal
• N Central – Warmer than normal
• S Central – Warmer than normal, especially TX
• Northwest – Cooler than normal, especially WA
• Southwest – Warmer than normal, especially AZ/NM

Expected Market Impact (provided by ESAI)
The WSI December forecast indicates warmer-than-normal temperatures in the key Northeast and North Central heating regions. After the Katrina-related supply disruptions, the warmer December outlook will be welcome news for those concerned about winter natural gas supplies. Warmer weather in the heating regions for December may not drive natural gas prices lower, but it will help to avoid the supply uncertainty that comes with a very cold start to the winter. Warmer weather and moderate natural gas prices will keep loads and prices in the power markets from escalating early in the season.

According to WSI seasonal forecaster Dr. Todd Crawford, “Recent significant changes in the North Pacific ocean temperatures have resulted in changes in our forecast model output, and we are expecting a warm start to the heating season in the major population centers of the East and Midwest. It is still too early to tell if this warm start will persist into the heart of winter.”

WSI successfully predicted (1) the hot summer nationwide in 2005, (2) the sharp transition to warm weather over the eastern US in June 2005, and (3) the cold and snowy winter of 2004-05 in the Northeast. 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 October-December will be issued on September 29, with the next new forecast package (for November-January) issued to clients on October 18 and to the press on October 27.

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.