May Energy Market Intel Webinar Recap

Article by Constellation

During Constellation’s May Energy Market Intel Webinar, principals from our Commodities Management Group (CMG) featured an in-depth summer outlook, key weather pattern drivers and market fundamentals. Here were the key takeaways from this month’s webinar:

Weather Update
The winter of 2017-18 came in a bit warmer than normal, despite the very cold late Dec/early Jan period. Most of the consistent strong cold was over the northern Rockies, northern Plains, and Upper Midwest. The MISO region came in colder than the 30-year normal. National gas weighted heating degree days came in around 2525, which is about 1% warmer than the 10-year normal.

Water temperatures across the tropical Pacific can effect summer temperatures across North America. La Niña summers tend to be hot leaning, while El Niño summers tend to be cool leaning. The tropical Pacific was in a weak La Niña state this winter, however recent warming has pushed water temperatures to near normal (neutral state). Most of the forecasts trend the tropical Pacific water temperatures close to weak El Niño status during the summer months.

Bottom line: Tropical Pacific (ENSO) region signal points to a weak cooler signal this summer.

Our internal forecast is leaning into our primary analog years, which favors most of the heat across the interior. West Texas could be tricky, with hotter risks for the first half of summer and cooler risks for the second half. The East could start off hot, with cooler risks for the second half of the summer.

Market Fundamentals
Late winter-season heating demand lingered into the 3^rd week of April and in the end resulted in the smallest net injection of gas into storage for April on record with only a net 31 Bcf injected into underground storage.  The storage deficit, currently at -35% to year-ago levels and -25% the five-year average has been supporting NYMEX prices above $2.50/MMBtu but steady production near 79-80 Bcf/d has been limiting the market from moving above $3/MMBtu.

On factor in forecasting gas production is the availability of pipeline takeaway capacity in a region, especially the Northeast, where available capacity new gas can be limited.  Two pipeline had important milestones on May 15^th.  First, the Rover pipeline has asked FERC for approval to bring the second half of the project; Mainline B into service.   That same day, Atlantic Sunrise received approval to start partial service of from Scranton PA to the MD/PA border.   Both projects will allow additional Marcellus/Utica production to come online over the course of this summer.

Higher than expected gas fired generation demand this summer could reduce injections into storage and thus the importance of the summer forecast.  Overall, lower inventories of gas in storage in early November are a bullish factor on pricing, however, rising natural gas production has kept a lid on such sentiment.

Rover Pipeline News
On May 15th Rover pipeline asked FERC for an “all-in in-service” request for Mainline B capacity of 1.3 Bcf/day. The same day, FERC granted for Transco pipeline permission to start partial service of 0.15 Bcf/day on its Atlantic Sunrise project, a 1.7 Bcf/day new lateral (Red line) that will bring gas directly from Scranton, PA, to Transco’s existing mainline pipeline (blue line) on the MD/PA border, allowing gas to flow as far as Alabama.

The additional capacity of net 3 Bcf/d between Rover and will allow Marcellus gas greater access to Midwest, Canadian & Southeast markets.

Register today for our June Market Intel Webinar, taking place on June 20, 2018 at 2:00PM ET.