In This Issue

Futures Day Trading Chat Room

Summary & Highlights of MDA EarthSat / PIRA Spring Energy Conference

Reports and Expiration Notices

June 14th, 2006 — Issue #331

Futures Day Trading Chat Room

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Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. You must review customer account agreement prior to establishing an account. Investors could lose more than their initial investment. You must review customer account agreement prior to establishing an account.

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.

Summary & Highlights of MDA EarthSat / PIRA Spring Energy Conference — NYC — May 1, 2006

Conference Overview: MDA EarthSat and PIRA gave a joint overview of key weather and significant fundamental factors facing the natural gas market during the upcoming summer months. This years speaker list includes the head of Load Analysis Group from PJM, the Director of North American Natural Gas from the PIRA Energy Group, the Deputy Director of EarthSat Weather, Meteorologist from NRG Energy and Meteorologist from NOAA's National Hurricane Center. The primary tone to the conference was bearish natural gas prices well into the end of this summer.

Power Generation Outlook: Kenneth Mancini, from PJM, gave an excellent demand overview from the perspective of one of the largest Regional Transmission Organizations in the U.S. For the summer of 2006, PJM is forecasting an unrestricted load (with no emergencies) of 133,500 megawatts. PJM operates with 165,303 MW of installed capacity resulting in a 25.8% reserve margin (exceeding forecast demand). Required reserves are established at 15%, thus PJM is operating well over critical levels. PJM also employs a load management option providing economic incentive for non-critical customers to decrease load requirements during peak demand and emergency situations. This program will decrease load requirements by 2,000 megawatts when load redistribution is required during emergency events. PJM is expecting cooler temperatures compared to the abnormal conditions of 2005, thus the all-time summer peak of 133,761 set on July 26, 2005 should not be challenged. Electric generation sources include a maximum of 27.9% from natural gas. During record demand of '05, the total electricity from natural gas sources only reached 5.9%. Mr. Mancini does not foresee a jump in natural gas demand due to electric generation buying or an increase in electric load requirements.

Summer Gas Storage: PIRA Energy Group's Richard Redash discussed the bearish fundamentals facing the natural gas market. Regardless of record high oil prices and the persistence of geopolitical concerns, natural gas remains primarily a domestic market isolated from substantial supply/demand disruptions experienced in crude. Comparing the first quarter of 2006 to the same period last year indicates actual daily production is lagging 2005 levels. Adjusting production for regions not damaged by storms reveals daily dry production has increased substantially. Furthermore, industrial gas demand, already trending lower before fall ?05, was further pressured by the hurricanes. That demand is recovering at a very slow rate, not a bullish situation. With natural gas prices falling below #6 oil, the pricing advantage could spark a small amount of substitution from operations capable of switching sources. Changes in boilers, etc. limit the potential demand gain to 1 Bcf/day. Essentially, PIRA forecasts limited gains on the demand side. PIRA expects a decline in futures due to record levels of storage by mid-summer. By the end of the second quarter, storage should reach 2.63 Tcf, greatly exceeding the high of 2.31 set in 2002. Thus, Mr. Redash forecasts prices should reach $5 by July.

Seasonal Weather Outlook: Matt Rogers from MDA EarthSat gave a detailed energy weather outlook for this summer concluding cooler temperatures compared to 2005. Warm waters expanding along the East coast is signaling La Nina is coming to an end. In fact, EarthSat is expecting a mild El Nina by mid-summer. The forecast for population weighted cooling degree days (CDDs) is currently set at 834.5 for June through August, substantially lower than 976.6 CDDs for 2005. The largest risk remains hotter temperatures in the West exceeding regional capacity. Offsetting the potential for greater regional demand will be substantial hydro supplies along the West Coast, with California reservoir storage reaching the highest levels in this decade.

Hurricane Forecasting: Hurricane Specialist Eric Blake from the National Hurricane Center discussed current activity indicators used in the upcoming official report. The 2006 official hurricane outlook is on track for release in 2-3 weeks including input from at least six individuals, Mr. Blake is a part of this group. NOAA is expected to forecast a less intense hurricane season compared to 2005. This prediction is predicated upon the tropical Atlantic sea surface temperature (SST's) mode remaining positive and anomalies being less than 2005. Furthermore, a decline in trade winds in the Caribbean allow for additional warming, increasing the buildup of hurricanes. The current pace of warming is much lower than levels established during the spring of 2005. Mr. Blake expects an active season compared to the norm, however, the number of hurricanes that will hit landfall is not available. The 2006 hurricane season should not exceed record intensity experienced during 2005.

Disclaimer:

Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

Economic Reports and Expiration Notices

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!