WSI Energycast Outlook Calls for Warm Period Southern Two-Thirds of US, cold North

The monthly breakdown follows:

In January:

• Northeast – Warmer than normal, especially ME
• Southeast – Warmer than normal
• N Central – Cooler than normal, except for WI/IL
• S Central – Warmer than normal, especially TX/OK
• Northwest – Cooler than normal, especially WA
• Southwest – Warmer than normal

Expected Market Impact (provided by ESAI)
WSI’s January forecast indicates warmer-than-normal temperatures in all areas except the North Central and Northwest regions. This warm forecast reduces the probability of severe cold in the Northeast where there is a high degree of concern that delivery curtailments due to gas pipeline limitations could occur under very high demand conditions. The cool outlook for the North Central States will provide a bullish demand offset to the potentially lower demands in other areas. Warmer-than-normal temperatures will moderate electric loads, particularly in the Northeast markets.

In February:

• Northeast – Cooler than normal, especially NY
• Southeast – Cooler than normal
• N Central – Warmer than normal, except MN/ND
• S Central – Warmer than normal, especially TX
• Northwest – Warmer than normal
• Southwest – Warmer than normal

Expected Market Impact (provided by ESAI)
WSI’s February forecast indicates cooler-than-normal temperatures throughout the eastern states. In New England, the probability of cold snaps increases and the congestion on the local gas systems during severe cold weather may cause delivered prices to spike strongly. The cooler-than-normal temperatures in the Northeast will increase natural gas demand, but warmer temperatures in the North Central and Plains states will lower gas demand in these areas. Power prices in the Northeast will be strong due to higher loads and the higher likelihood of stronger delivered gas prices.

In March:

• Northeast – Warmer than normal, except for ME
• Southeast – Warmer than normal
• N Central – Warmer than normal
• S Central – Warmer than normal, especially TX/LA
• Northwest – Warmer than normal, except WA/OR
• Southwest – Cooler than normal

Expected Market Impact (provided by ESAI)
The WSI March forecast indicates warmer-than-normal temperatures in all of the key northern heating regions. The warmer temperature outlook for the last month of winter should be moderately bearish for both gas and power prices as demand should be slightly lower than normal. A warmer March in the northern tier of the country would result in higher natural gas inventories at the end of the withdrawal season.

According to WSI seasonal forecaster Dr. Todd Crawford, “Our models suggest a return to above-normal temperatures in much of the eastern US in January, especially in the Southeast, followed by colder temperatures in February.”

WSI successfully predicted (1) the warm weather in the eastern US in November 2005, (2) the hot summer nationwide in 2005, and (3) the cold and snowy winter of 2004-05 in the Northeast.  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 January-March will be issued on December 29, with the next new forecast package (for February-April) issued to clients on January 17 and to the press on January 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.