Webinar Analysts: Geopolitical Energy Impacts, Natural Gas Fundamentals and ISO-NE DASI Insights
During Constellation’s March Energy Market Intelligence Webinar, the Commodities Management Group (CMG) provided comprehensive coverage of current and future factors that could affect the energy landscape, including a brief preview of spring weather predictions, geopolitical factors influencing energy prices, LNG disruptions, oil market impacts and ISO-NE DASI updates.
Weather Outlook
The webinar’s weather discussion noted a near-term pattern shift with the East expected to continue to be warmer than normal through the month of April and the West becoming more seasonal over the coming days, from what were record high temperatures. Looking at spring energy demand, April and May should be largely similar to last year, measured by heating degree days and cooling degree days, but remain below the 10-year average. Drought is also a key watch item heading into summer, signaling the potential for an early blast of heat in California and the desert Southwest, along with dryness across Texas and the Southeast. Drought conditions tend to bring more heat in summertime, serving as an early warning signal for air conditioning loads.
Middle Eastern Conflict & Energy Impacts
On February 28, conflict between the United States and Iran began, making markets highly reactionary to headlines, with overall outcomes and timelines being uncertain.
The largest impacts centered on the closure of the Strait of Hormuz, a key point for approximately 20% of the world’s oil and LNG that comes from facilities in the Persian Gulf. Pre-conflict flows through the Strait accounted for roughly 15M bbl/day of crude oil, 5M bbl/day of refined products and 10 Bcf/day of LNG. Another key impact has been strikes on dozens of refineries, oil fields, gas plants, ports and pipelines in and around the Persian Gulf.
In response, the International Energy Agency (IEA) agreed to discharge 400 million barrels from emergency oil reserves, its largest-ever release, aimed at limiting price volatility driven by the Middle East conflict. Economic effects may be felt in the short to medium term. Additionally, countries’ Strategic Petroleum Reserves (SPR) may help absorb shocks, though they are not a long-term solution.
Natural Gas Fundamentals
Looking at domestic natural gas fundamentals, Henry Hub prices remained relatively insulated from the Middle East-driven global LNG shock because U.S. LNG export capacity is already effectively maxed out, limiting any incremental demand pull on domestic gas even if Europe and Asia prices spike. On the supply side, U.S. production remains strong, averaging roughly 108.5 Bcf/d year to date and about 109 Bcf/d in March as freeze-offs ended.
Natural gas in storage stood near 1.8 Tcf at the time of the webinar, above year-ago and near or above the five-year average, with expectations for end-of-injection inventories approaching ~3.7 to 3.9 Tcf, a typically bearish setup absent major geopolitical disruption.
ISO-NE & Day-Ahead Ancillary Services Initiative (DASI)
Pipeline constraints in New England make it structurally different from most U.S. gas/power markets and therefore much more exposed to global LNG pricing and winter reliability risks. The Algonquin pipeline is the main “artery,” serving ~60–65% of delivered dry gas to New England, and constraints on this system, especially in winter when heating demand is high, can drive extreme basis and power price outcomes. During the late January cold snap, New England gas prices exceeded $120/MMBtu, with spillover into downstate New York, highlighting the region’s reliance on imported LNG to meet peak demand.
The Day-Ahead Ancillary Services Initiative (DASI), also referred to as DAAS, is an ISO-NE program designed to replace Locational Forward Reserves (LFR) and procure certain reserves day-ahead basis rather than a multi-month forward basis, allowing the system to be more agile with changing conditions. After a full year of the newly minted program, DASI costs came in significantly higher and more volatile than expected, totaling more than $1 billion. ISO-NE is advancing market design enhancements aimed at reducing costs, with approval targeted ahead of next winter.
Market Trends and Temperature
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 20 at 2 pm ET. Constellation 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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