Webinar Analysts: Executive Orders, Tariffs, Spring Outlook and Natural Gas Storage
During Constellation’s March Energy Market Intelligence Webinar, Constellation’s Commodities Management Group (CMG) provided comprehensive coverage of current and future factors significantly affecting the energy landscape, including the impact of recent executive orders on energy markets, budget reconciliation, spring weather outlook and a look at natural gas storage levels.
Weather Report
Chief Meteorologist Dave Ryan started the webinar with a recap of winter weather conditions. This past winter was slightly colder than the 30-year average but still warmer than the past decade. Looking ahead, it is predicted that the U.S. will see a mild spring and summer with a back-and-forth weather pattern. There is no blocking expected in the weather pattern, meaning there will be no high-pressure systems that prevent weather changes, and a positive arctic oscillation will keep the polar vortex over the Arctic circle.
The forecast for April suggested a brief period of colder-than-normal weather, followed by a generally mild pattern. For the summer, the weather models have been suggesting an average of about 975 population-weighted cooling degree days, which would be the 13th warmest on record. The forecast indicated a lot of heat in the Western states and a near-normal pattern in the East.
Trump Administration Impact on Energy
David Gilbert, the Vice President for Federal Government Affairs, covered the significant impact of President Trump’s Executive Orders on energy systems, which came swiftly and aggressively after his inauguration. These actions caused price volatility due to tariffs and market instability in the short-term. The first few weeks of Trump’s second term saw markets react to the announcement, pause and reinstatement of tariffs, along with reciprocal actions. Additionally, Gilbert mentioned that the Executive Orders could result in fewer regulations and a streamlined permitting process, potentially reducing royalties on public lands and increasing opportunities to drill for oil and natural gas.
The team also discussed the budget reconciliation process, which allows legislation to pass with a simple majority of 51 votes in the Senate. This process is crucial in deciding whether the Tax Cuts and Jobs Act (TCJA) tax cuts will be extended or modified. The TCJA, President Trump’s signature achievement in his first term, lowered tax rates across the board, with many of these rates set to expire at the end of this calendar year. If Congress does not act, taxes would increase by $4.5 trillion on individuals across the country. However, before reconciliation can occur, both the House and Senate must pass identical budget resolutions. Currently, there are significant differences between the House and Senate versions, which need to be reconciled. The House passed its budget and David pointed out that this was the first step in an over four-step process.
Natural Gas Storage Fundamentals
Experts then covered natural gas storage fundamentals and how higher production and warmer weather contribute to a short-term bearish outlook as we enter “shoulder” month demand. Year over year production levels will likely begin to diverge as we saw production drop last year on a significant storage surplus. This year we are facing a 27% deficit on a year over year basis. The withdrawal season is coming to a close, and the current storage will hover around 1.7 Tcf, about 600 Bcf less than this time last year. The forecast for production is about 105 billion cubic feet per day in 2025, moving up to about 108 billion cubic feet per day in 2026, which may cause a tight supply-demand balance through the rest of the year.
Looking at European gas storage levels, gas storage is currently very low, with some projections suggesting that by the end of the refill season, storage levels may only be about 75% full at 3.0 Tcf. This means there will be a continued strong demand for U.S. liquefied natural gas (LNG) as Europe continues to see a decline in natural gas imports from Russia.
Market Trends and Temperature
The experts discussed PJM’s capacity market, which is currently awaiting FERC’s decision on the settlement with Pennsylvania Governor Josh Shapiro. The settlement includes a new auction price floor and cap. FERC has indicated it will rule by April 21. The webinar concluded with a look at forward power charts, including conversations about “the right time to buy,” 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, May 21 at 2 pm ET. Constellation energy experts will offer detailed and timely updates on factors affecting the energy landscape 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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