Webinar Analysts: Sinking Energy Prices, an El Niño Summer and Strong Natural Gas Storage
During the May Constellation monthly Energy Market Intelligence Webinar, Constellation’s commodities management group (CMG) team covered sinking energy prices, summer weather outlook, natural gas production and storage, as well as key updates for the California and Texas markets.
Weather Outlook
Chief Meteorologist Dave Ryan kicked off the webinar covering the developing El Niño and the impacts that rising water temperatures in the Pacific are expected to have on summer and beyond. Dave also covered the peak river flows in the West as California saw record snowpack over the winter. Looking at summer weather, the strongest projections for above-normal temperatures remains over the Rockies and Mid-Continent as drought conditions continue to be severe. The market consensus on Population-Weighted Cooling Degree Days (PWCDD’s) for the summer hover around 990-1030. Hurricane risk is moderate, with an anticipated 12-14 named storms hitting the U.S. this storm season.
All Things Economic
Moving to the economy, Chief Economist Ed Fortunato broke out the chemistry set, developing his version of the Economic Periodic Table of Elements. Ed’s table breaks down all the factors that impact the economic outlook such as unemployment, GDP and Consumer Spending.
Natural Gas Supply & Demand Fundamentals
CMG experts Keith Poli & Brandon Fong moved on to natural gas production where production has been outperforming current EIA projections and the 2022 average. The EIA has noted March production reached an all-time record of 103.4 Bcf/day and April showed 103.3 Bcf/day. However, after hitting a 2.5 year high, production rigs have been experiencing some volatility, ranging from 153-166 rigs, due to the lower price environment. Moving to storage, the Eastern 2/3rds of the county remains healthy for the winter season due to high storage levels, while strong heating demand in the West and Mountain region have put the western storage in the hole for the demand season.
Regional Updates
The team looked at some regional updates including recent news coming from California and Texas. Starting in California, SDG&E and SoCalGas filed a joint petition to the California Public Utilities Commission (CPUC) last month requesting an increase in storage capacity at the Aliso Canyon facility in order to have more gas available in the LA Basin. The record snowpack in California is also contributing to the best hydro generation performance since 2019, which is expected to help offset the need for natural gas, allowing more gas to flow into storage.
Looking at Texas, ERCOT recently issued the May Seasonal Assessment of Resource Adequacy (SARA) update, showing a reserve margin of 23.2% for summer 2023 with the Capacity, Demand and Reserve (CDR) at a reserve margin highpoint of 25%. Solar and storage dominate expected new resources leaving ERCOT exposed to volatility if renewables underperform as there are only 72 GW of dispatchable resources available to operators.
Market Trends and Temperature
The team concluded the webinar by looking at the future of LNG Export Terminals, NYMEX natural gas prices, forward power charts and introduced a new segment, “Market Temperature,” looking at different factors affecting the energy market.
We invite you to join us for our next Energy Market Intel Webinar on Wednesday, June 21st at 2 pm 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.