The Impact of a Strong Economy & Hot Summer on Gas Production & Storage
2 min readDuring Constellation’s April 2021 Market Intel Webinar, Constellation market analysts provided a detailed look at energy market fundamentals in depth and wrapped up on a high note that was the reemergence of the Constellation Tomato Club.
Weather Update
Chief Meteorologist Dave Ryan captured the near-term weather outlook that features two notable shots of colder-than-normal air, which will dominate the latter part of April. Nighttime lows will be some 15 degrees below normal for this time of year even into the deeper parts of the South. The Western states, on the other hand, are much above normal and very dry. The heat in the West and very cool temperatures in the Eastern half of the nation are supportive of natural gas prices in the near term. The extreme drought conditions that are developing in much of the West could be conducive to high demand for gas-fired power generation this summer.
Economy Update
Exelon Chief Economist Ed Fortunato gave a high-level review of the U.S. economy focusing on the outlook for high growth in 2021. He talked about the various stimulus packages and the potential for yet another large spending infrastructure package going forward. The U.S. economy is poised for between 6 to 8 percent growth to GDP in 2021, something that has rarely happened in the post-war period. Fortunato also touched on the continued concerns over inflation in the teeth of record amounts of deficit spending.
Storage and Production Update
Constellation’s Commodities Management Group (CMG) focused on the latest natural gas market fundamentals. The natural gas market emerges from winter with storage inventories at the five-year average and prices rallying slightly into a colder weather pattern in the month of April.
Of note are the robust liquefied natural gas (LNG) exports that are poised to break records this year. The current price spread between the NYMEX natural gas futures price and LNG price indices in Asia and Europe favor continued robust LNG exports as the summer period approaches. The CMG team took a look back at April of 2020 taking note of the historic collapse in the crude oil market and LNG export market respectively.
Natural gas production continues to be relatively flat at 91 Bcf per day despite some increased volumes of gas coming from the oil-rich Permian Basin. The prospect of a strong economy, a potentially hot summer, and robust exports, could be constructive for natural gas pricing action in the fourth quarter of this year.
The CMG team devoted the last few minutes to discussion surrounding the Constellation Tomato Club. The Tomato Club is open to all listeners and gives regular updates and tips on tomato growing. This month featured a look at “no till, no dig” gardening and highlighted some pictures and commentary thereto. Your tomato photos can be submitted to CMG@constellation.com for a chance to be featured.
We invite you to join us for our next Energy Market Intel Webinar where Constellation energy experts continue to offer detailed and timely updates related to the energy market, economy and weather, and much more each month. Register by visiting www.constellation.com/marketintelwebinar.