Webinar Analysts: Failure to Launch, Winter Weather Impacts and Natural Gas Fundamentals
During the January Constellation monthly Energy Market Intelligence Webinar, the commodities management group (CMG) team covered the collapse of winter, a recession update, natural gas production and storage, and reactions from the cold end of December.
Chief Meteorologist Dave Ryan began the webinar by offering his cold-weather forecast. Winter has largely eluded the U.S., with January expected to be the 4th warmest of all time with nearly 800 population-weighted heating degree days. Ryan also covered his outlook for February, which is leaning colder than normal in the U.S.
All Things Economic
Chief Economist Ed Fortunato then covered The Conference Board’s Leading Indicator Index, which turned negative in November, signaling a recession is becoming more likely. In addition, indicators such as equity markets, auto sales, and commodity prices are increasingly flashing recession signals.
Natural Gas Supply & Demand Fundamentals
CMG experts moved on to natural gas fundamentals starting with production. Production fell during the cold weather in December but recovered to over 100 Bcf/d in January. Production is expected to rise over the year to near 101 Bcf/d as producers are expected to increase capital spending slightly over 2022. Moving to storage, the storage market has been highly volatile, seeing huge withdrawals (over 200 Bcf) in December but also experiencing the first-ever January injection for the week ending January 6th. As a result, the storage deficit has slowly shrunk, moving to just over the 5-year average. Still, storage is highly dependent on cold weather driving up demand, the return of Freeport LNG, and the economic outlook. On January 17th, it was reported that Freeport LNG had started to receive gas, possibly indicating a restart, but federal regulators yet to give the green light. The team also looked internationally at reduced demand in Europe but increased demand in Asia.
The team quickly checked in on California as recent snowpacks, the strongest since 2005, have brought reservoirs closer to their 5-year average inventory. However, California is also experiencing high gas demand and struggling supply due to reduced flows through California Line 2000. This has caused multi-year high natural gas prices in California.
Winter Storm Elliott Takeaways
Moving East, the team looked back at impacts felt in the ISONE and PJM regions during Winter Storm Elliott. Both regions experienced high outage rates from natural gas plants as demand skyrocketed and prices reached $2,000/MWh. The Regional ISOs levied high fines on the generators who went offline. During the storm, ERCOT and MISO experienced similar generator issues but were bailed out by strong wind generation, setting a new winter load of 73.8 GW.
Market Trends and Temperature
The team concluded the webinar by looking over 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, February 15th 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.