WSI Energycast Outlook Calls for Mild Temperatures in Northern US for January-March Period.

WSI and ESAI Issue an Update of Special Interest to Energy Traders 

ANDOVER, Mass. -- WSI Corporation today issued the seasonal outlook for the upcoming three-month period (January-March). WSI expects this period to average warmer than normal across the northern two-thirds of the country, with below-normal temperatures confined to the southern tier of states. The WSI seasonal outlooks reference a standard 30-year normal (1971-2000).

The monthly breakdown follows:

In January:

Northeast - Warmer than normal

Southeast - Colder than normal

N Central - Warmer than normal, especially WI/MI

S Central - Colder than normal, especially TX

Northwest - Warmer than normal

Southwest - Warmer than normal

Expected Market Impact (provided by ESAI)

The WSI January forecast indicates warmer-than-normal temperatures across most of the country with cooler-than-normal temperatures in the Southeast and Texas. Particularly mild temperatures are expected in the North Central region which is one of the major gas consuming areas. Following a warmer-than-normal December in much of the country, the mild outlook for most of the country is bearish for natural gas markets as inventories in storage are still well above 5-year averages. Lower demand in the North Central and Northeast regions for natural gas will be the primary drivers for the bearish outlook in January. In addition, the warmer January outlook should also result in lower average gas basis prices into key northern delivery points. Power prices in the Northern regions will be moderated as the chances for deep cold snaps decrease with this current forecast.

In February:

Northeast - Warmer than normal, especially NJ/PA

Southeast - Cooler than normal

N Central - Warmer than normal

S Central - Cooler than normal, especially TX

Northwest - Warmer than normal, especially MT

Southwest - Warmer than normal

Expected Market Impact (provided by ESAI)

The WSI February forecast indicates warmer-than-normal temperatures across most regions of the country, with the exception of the Southeast and South Central regions. Warmer temperatures in most regions - particularly the North Central and Northeast regions - will result in lower demand for natural gas from both the heating and power sectors. Cooler temperatures in the southern regions will not provide a significant offset to lower demand in the northern regions. The continuation of mild temperatures in February should contribute to high end-of-season natural gas inventories in April. Due to the expectation of moderated natural gas prices and warmer temperatures, power prices throughout the northern regions should also be moderate.

In March:

Northeast - Warmer than normal

Southeast - Colder than normal, especially FL

N Central - Warmer than normal, especially ND/MN

S Central - Colder than normal, especially TX

Northwest - Warmer than normal

Southwest - Colder than normal, except CA/NV

Expected Market Impact (provided by ESAI)

The WSI March forecast indicates warmer-than-normal temperatures across most regions of the country, especially in key heating demand areas across the northern tier of the country. Cooler weather in the Southeast will have no significant impact on gas demand as a potential offset to lower demand in the northern regions. If the mild January and February forecasts are realized, then the warmer March outlook will be very bearish for natural gas prices. Lower natural gas prices and lower loads with warmer temperatures will translate into lower power prices in most regions.

According to WSI seasonal forecaster Dr. Todd Crawford, "The combination of cool North Pacific ocean temperatures and a moderate El Nino event in the tropical Pacific has resulted in weather patterns that are more typically associated with a strong El Nino event, with warm temperatures across all of the northern US. These patterns should generally continue for the remainder of the winter, but we think that the warmth will not be nearly as extreme as it has been in December."

WSI successfully predicted (1) the abrupt transition to below-normal temperatures in the US in September 2006, (2) the warm US summer in 2006, (3) the warm weather in the eastern US in January 2006, and (4) the warm 2005-06 US winter as a whole. 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. An update to the current forecast will be issued on December 28, with the next new forecast package (for February-April) issued on January 16.

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.wsi.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.