Webinar Analysts: Grading the Market, Winter Outlook, and Record Demand
During the September Constellation monthly Energy Market Intelligence Webinar, the commodities management group (CMG) team covered “The Summer of Heat” , a winter outlook, interest rates, natural gas production and storage and record demand fundamentals.
Weather Outlook
Chief Meteorologist Dave Ryan began by recapping “The Summer of Heat” as the United States experienced its hottest summer since 1950, with 1,056 Population Weighted Cooling Degree Days (PWCDD’s). The Summer of Heat also brought along significant drought in the West, Southwest and even parts of the Northeast which Ryan predicts will last throughout the winter.
Moving on to the winter outlook, we are entering a third year of La Niña, which has only happened a handful of times in the past 100 years. In past years, a third year of La Niña has resulted in cold temperatures, however, Ryan expects the U.S. to experience similar cooling patterns to the previous two years, with a warm end to the year, and winter cooling starting in late December to January. Historically, winter weather starts to show around Thanksgiving. Ryan expects the Plains States and Texas to experience cold weather this winter, with the Pacific Northwest being wetter-than-usual, and the aforementioned drought continuing in California and the Desert Southwest.
All Thing Economic
Discussion moved to the economy, with Chief Economist Ed Fortunato remaining on Fed-watch as interest rates are expected to rise 75 basis points after the Fed meeting on September 20-21, and we can expect higher rates after the meetings in November and December. The higher inflation has affected all aspects of the consumer, including home buying, vehicle purchasing and credit card rates.
Natural Gas Fundamentals
Commodities Management Group (CMG) experts covered natural gas fundamentals as all eyes are on storage as the close of injection season looms and winter is on the doorstep. While producers are still exhibiting newfound discipline, buying back stock rather than investing in drilling, the EIA’s Short-Term Energy Outlook (STEO) predicts production will reach 98.7 Bcf/d by December. The market is also responding to higher gas prices, gas rigs, which, per Baker Hughes, are up, but not at pre-COVID levels. With all that said, the CMG Team and the EIA predict that natural gas storage will finish below-average, which has been hindered by an average 86.6 Bcf/d demand, the highest annual demand on record.
The CMG team then moved to LNG. A “second wave” of exports is building, as the Freeport facility will begin partial service around November 1st, Calcasieu Pass has been exporting ahead of schedule and Golden Pass, Plaquemines and Corpus Christi Stage III will all introduce new export capacity starting in 2024. NYMEX prices will remain sensitive to global demand and exports, especially with volatility in Europe. The CMG team segued to Europe, which could see a difficult winter ahead as natural gas from Nord Stream I has been cut off by Russia and the EU could face gas rationing this winter. European gas prices have been steadily rising, above crude oil and U.S. prices, and have affected European industrial gas demand, which dropped 30% in August 2022.
Grading the Market
The CMG team finished the webinar by offering their “grades” into how the discussed market fundamentals impact your energy strategy, whether to be bullish or bearish with your decision making.
We invite you to join us for our next Energy Market Intel Webinar on Wednesday, October 19 at 2pm 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.