Webinar Analysts: Reevaluate Your Winter Energy Strategy in Light of Rising Prices
During Constellation’s September 2021 Energy Market Intel Webinar, the Commodities Management Group (CMG) featured the current state of the weather coupled with a first look at the winter outlook, a comparison of pricing action and other key market indicators from two months ago, and a discussion about the prospects for increasing production and other fundamental drivers.
Constellation’s Chief Meteorologist Dave Ryan pointed out that this summer is going to register as the sixth hottest since 1950, and robust demand for electric power has followed through the season. September is going to be “warmer than normal,” which gives some additional near-term support to gas and power pricing.
The first winter forecasts are being circulated with a bias to a “warmer-than-normal” look, however, Dave Ryan posits that a weak La Niña condition combined with higher-than-average arctic ice pack may deliver a colder winter.
Storage and Production Update
Next, the Constellation team reviewed the month-over-month energy analytics relative to production, exports, and storage. For example,
- Production of natural gas is down slightly from July, and, importantly, the gas-directed rig count is also down from 104 units to 101, signaling continued producer discipline in the teeth of rising commodity prices.
- Storage inventories remain at 7% below the five-year-average, and exports continue at a very strong pace.
- The outlook for production for the rest of the year is essentially flat, which is supportive of the market in general.
- The outlook for exports through 2021 and into the first half of 2022 is strong as Asian and European liquefied natural gas price indices are extremely favorable.
Pricing Action and Strategy
Additionally, the Constellation team examined the recent pricing action and the longer-term futures prices in power and natural gas, noting the steeply backwardated condition of the price curves; prices are much higher in the near months and tail off sharply in the future. This condition may allow consumers to lengthen contract terms in order to capture a lower-weighted average cost of energy.
The team then reviewed three scenarios where a customer may find themselves: 1) short of winter energy, 2) modestly covered but still in need of significant volumes, or 3) fully covered in this rising price environment. Market analysts shared ideas about how to manage risk and how to ensure the end user has a strong handle on how much volume is outstanding in future month. With energy prices rising rapidly and winter on the horizon, now is a good time to reach out to your Constellation representative.
We invite you to join us for our next Energy Market Intel Webinar where Constellation energy experts will continue to offer detailed and timely updates related to the energy market, economy and weather, and much more each month. Register by visiting www.constellation.com/marketintelwebinar.