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WSI Expects Cool East, Warm West Over Next 3 Months

December 27, 2004
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WSI Expects Cool East, Warm West Over Next 3 Months

Andover, MA-based WSI Corp. is expecting a big weather change to take place in the East compared to the winter heating season to date. The company said in its latest forecast that it expects the January through March period to average cooler-than-normal in the eastern part of the country and warmer-than-normal in the West.

Specifically, the forecasting firm said it expects cooler-than-normal temperatures generally east of a line from Buffalo, NY to Houston, TX, while warmer-than-normal temperatures will be found in most other regions, especially west of a line from Minneapolis, MN to San Diego, CA. The seasonal outlooks references a standard 30-year normal (1971-2000).

"Our forecast models continue to indicate that the remainder of the winter will average out to be colder than normal in the East and warmer than normal in the West," said WSI seasonal forecaster Todd Crawford. "The model output for this period has been quite consistent since our original winter forecast in October."

For the month of January, WSI said it expects cooler-than-normal conditions in the East, especially New York, Pennsylvania, Maryland, Virginia, North Carolina and South Carolina. The Central and Western states are expected to be warmer than normal except for Wisconsin, Illinois and Texas.

"The Northeast states have heavy winter gas demand for heating in addition to the power sector demand," WSI pointed out. "Basis spreads to Henry Hub can widen dramatically during extremely cold weather as gas pipeline constraints can cause delivered prices in the Northeast to escalate rapidly." The company added that the warmer-than-normal weather in the rest of the country "should significantly" lower average demand in January, possibly keeping market price volatility in check.

During February, cooler-than-normal temperatures are expected to invade the South Central states, while the West and North Central states remain warm. With the East remaining cool during this time, WSI said its forecast for cooler-than-normal temperatures -- especially in the more demand-intensive Northeast states -- is bullish for natural gas demand.

"Natural gas pipeline constraints remain an issue in February during extreme cold weather," WSI pointed out. "Overall demand for natural gas should be moderated by the warmer-than-normal temperatures in the Central and Western regions. Heating oil demand is dominated by the Northeast where the cooler temperature outlook will have a bullish impact on demand."

By the time March rolls around, almost all of the United States is expected to see warmer-than-normal temperatures, with the exception of the Florida, Colorado and Utah. "Perceived demand in March has a major impact on markets as cold weather in January and February could leave inventories lean," the firm said. "A warmer outlook for March relieves end-season supply concerns and will be a bearish factor in the midst of the bullish, cooler-than-normal outlooks for January and February.

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