Mid-Winter Energy Market Report Card and 2019 Outlook

Article by Commodities Management Group

Weather Front and Center

In Constellation’s January 2019 Market Intel Webinar, the weather was front and center. A wave of warmer-than-normal temperatures throughout much of the U.S. in December and the first half of January has given way to a much-below normal air mass. The question is, how long do these below-normal temperatures persist and how deep is the new colder weather pattern?

Constellation’s senior meteorologist Andrew Durante posited that the last week of January would be exceptionally cold in the eastern half of the country and bitter cold in the Great Lakes Region as the weather phenomenon known as the Polar Vortex will bring arctic air down over the Great Lakes region. Due to a lack of blocking, the Polar Vortex will move through rapidly, and a warm up will follow with Chicago moving from a low of -22 degrees Fahrenheit on Wednesday to a low of 35 degrees Fahrenheit on Saturday. Strong below-normal temperatures will return to western Canada in the 6-10 day period through early February, and a below-normal pattern will be extensive across the West and Great Lakes for the second week of February. The East Coast will see normal temperatures for mid-February with the models in disagreement for the second half of February. The March forecast shows a warmer-than-normal outcome based on typical El Niño winters.

Outlook for 2019: Global Economy, Trade and Energy Exports Rising

The analysts looked at what may be coming in 2019 and how those things might affect the energy markets. Constellation’s Ed Fortunato, who oversees the Market Fundamentals team, brought his perspectives relative to the global economic outlook in 2019, trade issues such as those with China, and liquefied natural gas (LNG) exports going forward. A slowing global economy in 2019 can be attributed to higher interest rates and ongoing trade tensions between the U.S. and China, which have carried over into the first half of the year. Additionally, Brexit hangs in the balance and could have an impact on a rather tepid European Union economy. Could the U.S. energy markets be affected by the trade war brewing with China? Could a bourgeoning U.S. LNG export market be affected by tariffs and other financial tensions among the major economies? These items were discussed in some detail and will be followed up on in subsequent webinars in 2019.

Energy Market Fundamentals and Pricing Action

Inventories of natural gas in underground storage have improved relative to the same period last year but remain well below the five-year average. During the webinar, the analysts touched on outlook for natural gas inventories in storage and the potential effect on pricing during the second quarter of 2019.  Additionally, natural gas production and the outlook for 2019 was reviewed along with some interesting input relative to the influence of crude oil prices on electric power and gas markets in the near and mid-term. LNG export capacity is set to double in 2019 from last year and the effects of this on the future of the U.S. gas and electric power markets was examined as well.

Please join us on Wednesday, February 20th at 2:00 p.m. ET for our next Energy Market Intel Webinar. We will look at the end-of-winter forecast, its effect on pricing, the market fundamentals focusing on production, storage, and consumption and take a dive into what is next on the LNG export front.