Webinar Analysts: Two Weeks of Winter
During the February Constellation monthly Energy Market Intelligence Webinar, Constellation’s Commodities Management Group (CMG) covered the trend towards the warmest U.S. winter on record since 1950, key economic insights, an update on natural gas production and storage, and potential long-term impacts of the recent LNG moratorium.
Weather Update
Chief Meteorologist Dave Ryan kicked off the webinar by discussing the winter that never was. The winter of 2023-2024 is trending to be the warmest on record in the U.S. with very low heating demand and high gas storage levels. The outlook for March and April remains mild with El Niño conditions weakening. The team also covered the drought outlook in the Western and Midwest states.
All Things Economic
Chief Economist Ed Fortunato looked at the current state of the economy, which is strong and resilient, with low unemployment, moderate inflation and steady growth. The Fed is expected to cut rates two or three times before the election, but the impact on the energy markets is likely to be limited. The economy continues to shrug off higher-for-longer interest rates. The Fed is trying to walk a fine line between rate cuts supercharging the economy leading to inflation and holding rates steady potentially sparking a recession.
Natural Gas Fundamentals
U.S. natural gas production reached a record high of 105 BCF per day in January 2024, despite low prices and reduced rig counts. The producers have achieved significant efficiency gains and cost reductions, and some have hedged their output at higher prices. The market is looking for signs of production decline or slowdown to balance the supply and demand. The power markets in the U.S. are also influenced by the gas dynamics as well as the growth of renewable and distributed energy resources.
Regional Market Updates
The team offered some insights into the 2025/26 PJM Base Residual Auction, which is likely to be held in July of this year. Rule changes by the FERC are intended to bolster reliability and ensure units that clear the auction can perform.
The New England capacity markets are undergoing some changes and challenges, as they try to value the reliability and performance of different types of generation.
LNG Export Moratorium
U.S. LNG exports have been increasing and diversifying, but they face some uncertainties and risks due to the potential moratorium imposed by the DOE on new export licenses for facilities that do not currently hold permits from the DOE. The team broke down the short- and long-term impacts of this moratorium, as projects unaffected by the moratorium continue the current narrative of “U.S. LNG exports to double by 2028-29”.
Market Trends and Temperature
The team concluded the webinar by looking at forward power charts, the “Market Temperature,” and other factors affecting the energy market.
We invite you to join us for our next Energy Market Intel Webinar on Wednesday, March 20th at 2 pm ET. Constellation energy experts will offer detailed and timely updates on factors affecting energy prices such as weather, natural gas storage and production, and domestic and global economic conditions. Register by visiting www.constellation.com/marketintelwebinar.
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