WSI Energycast Outlook Calls for Very Mild January, Cold February/March in the Eastern US; Very Cold January-March Period in Western US

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WSI Corporation issued the seasonal outlook for the upcoming three-month period (January-March). WSI expects the upcoming three-month period to average colder than normal across the northwestern half of the US, with above-normal temperatures confined to the south-central, southeastern, and northeastern US. The WSI seasonal outlooks reference a standard 30-year normal (1971-2000).

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WSI Corporation issued the seasonal outlook for the upcoming three-month period (January-March). WSI expects the upcoming three-month period to average colder than normal across the northwestern half of the US, with above-normal temperatures confined to the south-central, southeastern, and northeastern US. The WSI seasonal outlooks reference a standard 30-year normal (1971-2000).

The monthly breakdown for the upcoming fall season follows:
In January:
Northeast     - Warmer than normal
Southeast     - Warmer than normal
N Central     - Colder than normal, except WI/IL/MI
S Central     - Warmer than normal
Northwest     - Colder than normal
Southwest     - Colder than normal

Expected Market Impact (provided by ESAI)            
The WSI January forecast indicates warmer-than-normal temperatures in the key Northeast and Midwest regions; colder-than-normal temperatures are expected in the Rockies, Pacific Northwest, and California. Natural gas and power prices are likely to remain soft east of the Mississippi, particularly in New York, New England and PJM where natural gas basis prices play a key role during the heart of winter. In addition, with low sulfur No. 6 fuel oil trading at a discount to delivered natural gas, fuel switching for power generation is likely to soften demand for natural gas, and pressure heat rates (particularly in the Northeast). Implied on-peak market heat rates will be lower than otherwise in the regions that have fuel-switching capabilities. The marginal reduction in natural-gas demand will likely also combine with the warmer-than-normal temperatures in the South to keep prices Henry Hub subdued through January. Natural gas and power prices are likely to firm in California, however, where the widespread unseasonably cold weather will boost demand for heating. With gas inventories in the Consuming West two percent above last year's levels and nearly twelve percent above the five-year average, the gas market remains well supplied and able to handle this increase in demand.

In February:
Northeast     - Colder than normal, except NJ/DE/MD
Southeast     - Warmer than normal
N Central     - Colder than normal
S Central     - Warmer than normal
Northwest     - Colder than normal
Southwest     - Colder than normal

Expected Market Impact (provided by ESAI)            
The WSI February forecast indicates colder-than-normal temperatures entering the Upper Midwest and Northeast, while warmer-than-normal temperatures are expected to remain in Texas and the South. This will likely boost power and gas demand and prices in February from the subdued levels of January. The effect of a warmer-than-normal January in the Consuming East, however, is expected to leave the market well-supplied for February. Considering the softness of fuel oil prices, significant basis spikes are unlikely in the Northeast in all but the coldest of days. In addition, with warmer-than-normal temperatures reaching as far north as Pennsylvania, basis strength is likely to be limited to TZ6 NY and Algonquin city gate. WSI expects the Pacific Northwest and California to remain colder-than-normal in February. Although the Consuming West is entering the winter heating season in a very well-supplied position, the cumulative effect of a colder-than-normal January followed by a colder-than-normal February will likely draw down the surplus to the five-year average. This could leave the Consuming West vulnerable to higher gas prices should the cold weather last longer or temperatures be colder than expected.

In March:
Northeast     - Colder than normal
Southeast     - Warmer than normal, except MS
N Central     - Colder than normal
S Central     - Colder than normal
Northwest     - Colder than normal
Southwest     - Colder than normal

Expected Market Impact (provided by ESAI)            
The WSI March forecast indicates colder-than-normal temperatures throughout most of the United States (with the exception of the Southeast); much colder-than-normal temperatures are expected to linger in the Northwest and California. Natural gas prices are likely to feel the effects of this prolonged cold. With the warmer-than-normal January and competitive fuel oil pricing, the Northeast should be in a good position to withstand the late season cold. Natural gas prices are likely to firm from the depressed levels of December and January, however, as the surplus to the five- year average is likely to be burned off. The widespread nature of the cold temperatures will increase demand, and will likely boost basis prices in New York, New England, and in the upper Mid-West. After three months of colder-than-normal temperatures, California and the Consuming West will likely be running thin on natural gas inventories, and could be looking at a sizable basis premium (and even a supply problem) by March. Though entering the winter heating season with a twelve percent surplus to the five-year average of natural gas inventories, three months of (widespread) colder than normal temperatures in the West may begin to present problems by the end of March.

According to WSI seasonal forecaster Dr. Todd Crawford, "The cold pattern observed in the eastern US during much of November and December will begin to retrogress westward and northward by late December and into early January, so that the coldest temperatures will become centered in the western and north-central US by January. Most of the East should be quite mild in January, before the pattern shifts again in February and March to allow for below-normal temperatures to return to the Northeast. The Southeast should generally remain quite mild during the January-March period, while much of the West will be unusually cold. Current oceanic and atmospheric indicators are quite similar to those observed during the winters of the early 1960s, when cold western US winter were commonplace. The Northeast will continue to experience larger-than-normal subseasonal variability than other regions this winter, especially in February and March, similar to what has been observed so far in December."

WSI, which provides customized weather information to energy traders, issues its seasonal outlook twice-monthly. The next new forecast package (for February-April) will be issued on January 13.

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 was recently purchased by a consortium made up of NBC Universal and the private equity firms The Blackstone Group and Bain Capital. More information about WSI can be found at http://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 http://www.esai.com.

Contacts:
Kristen Sullivan
WSI
(978) 983-6607

Jill Kinsley
ESAI
(781) 245-2036

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