WSI Energycast Outlook Calls for Cool Period in Northern Half of US, Warm in Southeast

The monthly breakdown follows:

In October:

• Northeast – Cooler than normal, with exception of PA/NJ/MD/DE
• Southeast – Cooler than normal, with exception of FL
• N Central – Much cooler than normal
• S Central – Cooler than normal, with exception of W TX
• Northwest – Cooler than normal
• Southwest – Warmer than normal

Effects in the Marketplace
WSI’s forecast indicates cooler-than-normal temperatures in October for the Northeast, North and South Central and Northwest states. October shoulder demand for power and gas will lower the impacts of variations in weather. With the expectation of much cooler-than-normal temperatures in late October, some early season natural gas demand could kick in, however, inventories are high and early demand should not be overly bullish for natural gas prices.

In November:

• Northeast – Cooler than normal, with exception of NJ/MD/DE
• Southeast – Warmer than norma
• N Central – Cooler than normal
• S Central – Warmer than normal, especially TX
• Northwest – Warmer than normal
• Southwest – Warmer than normal

Effects in the Marketplace
WSI’s forecast for November indicates cooler-than-normal temperatures in the Northeast and North Central states. As the natural gas market shifts from inventory building to drawdown mode, above normal heating demand in November could cause the market to be concerned that a higher rate of drawdowns for natural gas may be indicative of a longer-term trend. High natural gas inventories entering November will help to moderate the effects of this concern. Power prices are unlikely to be affected by shifts in weather and will be impacted more by seasonal generator maintenance.

In December:

• Northeast – Warmer than normal
• Southeast – Warmer than normal
• N Central – Cooler than normal
• S Central – Warmer than normal
• Northwest – Warmer than normal
• Southwest – Warmer than normal

Effects in the Marketplace
WSI’s forecast for December indicates warmer-than-normal temperatures in most regions with the exception of the North Central states, which will be cooler-than-normal. Higher heating demand for natural gas in the North Central states will be offset by lower demand in other regions. Power prices are likely to be moderate to weak in most regions as the generator maintenance season ends by early December and the warmer-than-normal forecast indicates that power plants will not be competing aggressively with heating demand for fuels.

According to WSI seasonal forecaster Dr. Todd Crawford, “We expect widespread areas of below-normal temperatures in October, with the cold weather continuing in the northern and central Plains in November and December. We currently expect near to slightly above-normal temperatures in most of the eastern US in November and December.”

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 October-December will be issued on September 30, with the next new forecast package (for November-January) issued to clients on October 19 and to the press on October 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.