Webinar Analysts: Out of the Frying Pan
During the July Constellation monthly Energy Market Intelligence Webinar, Constellation’s commodities management group (CMG) provided an update on the recent scorching weather, economic conditions, notable natural gas and LNG developments and regional highlights.
Weather Outlook
Chief Meteorologist, Dave Ryan, started the webinar with an update on the hot start to summer and El Nino and its impact on sea temperatures. Dave also shared updates on the U.S. drought and the 2023 tropical storm season, where he anticipates increased activity along the Eastern seaboard. Finally, the team covered an early winter preview and how El Nino will continue to influence temperatures and snowfall for the winter months.
All Things Economic
Covering the economy, Chief Economist, Ed Fortunato, provided a compare and contrast of economic indicators today and pre-pandemic in 2019. Ed highlighted how most key indicators are performing in lockstep or better with the 2019 numbers, which provides more insight into the potential for recession. The only notable exception is that interest rates are double where they were in 2019. Ed also provided a compare and contrast of Wall Street, which has been bullish on the economy and the Fed which has been more bearish. Its primary tool is managing interest rates and liquidity to the system, neither of which has completely tamed inflation, but inflation has been declining.
Supply and Demand Fundamentals
The team looked at the history and current status of the Strategic Petroleum Reserve in the United States, the world’s largest supply of emergency crude oil, which is currently at its 40-year low. Moving to natural gas, the team evaluated production, which has fallen back in line with the Energy Information Administration’s (EIA) 2023 forecast. Looking at storage, a mild spring was beneficial to keeping stocks close to full, however recent hot weather has increased power burns which may prevent stocks from reaching a predicted end-of-season level of 4.0 Tcf. Finally, the team offered updates on NextDecade’s Rio Grande LNG project that has recently been greenlit to begin construction.
Regional Updates
Looking at regional fundamentals so far this summer, in Texas, ERCOT has set several all-time record loads (the most recent of 82.6 GW on 7/16) but wind generation has been higher than average since mid-June, which has kept a lid on real-time prices. Wind output will continue to play a major factor in ERCOT as thermal generation lags and the need for new gas peakers along with a growing fleet of batteries will be key for Texas summers for the next few years.
In California, all eyes are on battery storage, as resources are becoming increasingly important to CAISO grid operators looking to meet demand during critical evening peaks.
Market Trends and Temperature
The team concluded the webinar by looking at NYMEX natural gas prices, forward power charts, 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, September 13th at 2 pm ET, 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.