Webinar Analysts: Seize the Day, Natural Gas Fundamentals and Winter Demand
During the October Constellation monthly Energy Market Intelligence Webinar, the commodities management group (CMG) team covered an outlook for winter weather, how energy is impacting inflation and key fundamentals on natural gas storage, product and policies.
Weather Outlook
Chief Meteorologist Dave Ryan began by recapping the hurricane season as the tropics have indicated that it is largely over. Moving on to the winter, current models forecast a warmer-than-normal December, but Ryan has concerns about blocking that could draw cold air into the lower 48 in December. Ryan also noted that three back-to-back “La Niña” years have resulted in cold winters. It is noteworthy that the U.S. is in its third consecutive “La Niña” year as winter looms. Ryan concluded with updates on the drought that continues to cover over 70% of the U.S. and a winter weather outlook for Europe.
All Things Economic
Chief Economist Ed Fortunato covered the stubborn and rising inflation in the U.S. As Fortunato has explained before, the cost of energy is a major driver of inflation as it is involved with all aspects of the Core Consumer Price Index (CPI). Fortunato focused on the global oil markets as OPEC+ has announced cuts of 2 million barrels per day to supporting pricing. With global demand for oil forecasted to increase 2 million barrels per day in 2023 coupled with the announced production cuts from OPEC+ and the draining of the U.S. strategic petroleum reserves, is a potential recipe for much higher oil prices next year further exacerbating inflation.
Natural Gas Fundamentals
The Commodities Management Group (CMG) experts covered natural gas fundamentals starting with gas storage as inventories have been closing the gap on a deficit to the five-year average. A string of triple digit storage injections over the past five weeks are a factor in the recent downward price pressure as the injection season comes to an end October 31st.
Gas production has exceeded the EIA’s 2022 target but the lack of new pipeline capacity, especially in the Marcellus and Permian present a significant headwind to production growth in the coming three-year period. The team noted the exceptional future demand growth of LNG exports relative to the current lack of sufficient pipeline capacity to meet that demand as an agent of price volatility and the need for large amounts of infrastructure additions to the natural gas supply chain.
The team wrapped up discussion with an outlook to winter, focusing primarily on the Northeast which will be sensitive to European natural gas prices (TTF) as the Northeast relies primarily on LNG imports to supplement winter natural gas demand as coal and nuclear production continues to be phased out.
Grading the Market
The CMG team finished the webinar by offering their “grades” into how the discussed market fundamentals impact your energy strategy, whether to be bullish or bearish with your decision making.
We invite you to join us for our next Energy Market Intel Webinar on Wednesday, November 9 at 2pm EST, where Constellation energy experts offer detailed and timely updates on factors affecting energy prices such as weather, gas storage and production, and domestic and global economic conditions. Register by visiting www.constellation.com/marketintelwebinar