Webinar Analysts: Spring Forecast, Inflation and Natural Gas Fundamentals
During the February 2022 Constellation monthly Energy Market Intelligence webinar, the commodities management group (CMG) team covered the spring forecast, their latest on economic and inflation risks, gas and power market fundamentals, and pricing trends.
Weather Outlook
Last webinar, Constellation Chief Meteorologist Dave Ryan mentioned that last December was the second warmest since 1950. January and February 2022 were a little colder than the 30-year normal and overall winter ought to be near the 10-year average. Ryan noted that American and European weather models are showing that seasons are starting to change. There’s still cold air in Canada and in the Northeastern part of the U.S. that will hang around for a while, keeping temperatures cold. As we move into the spring months, the West and ERCOT regions will experience ongoing severe drought, the North and Northeast will stay cold as long as cold air remains in Canada, and the Midwest and Ohio Valley will be warmer than usual this spring and may experience some severe weather.
Economy Outlook
Shifting the conversation to the economy, Constellation Chief Economist, Ed Fortunato mentioned that interest rate trends are changing. Can we reverse a 40-year trend of low interest rates? What impact will this have on the economy? Several factors are at play here, not just low interest rates. Unaccounted for wage growth and inflation also figure into the overall picture of the economy. The Fed is moving interest rates to avoid a recession like we had in 1980.
Natural Gas Supply & Demand Outlook
The CMG team talked about private and public producers of oil and wondered if larger exploration and production companies will stay disciplined with their production. There was strong production in 2021, mainly due to DUC (drilled but incomplete) wells, most companies are being careful and not overextending themselves.
On the demand side this winter, there have been increased withdrawals, 4 consecutive weeks of 200+ Bcf withdrawal. The last time we saw action like this was the 2014 Polar Vortex.
Regional Updates
The CMG team compared Winter Storm Uri in Texas to the February 2022 storm and the success/feedback of winterization efforts by ERCOT. The team also looked at gas prices in New England (ISONE) as they have been the highest since the Polar Vortex in 2014.
Winter prices for natural gas are always volatile in this area of the U.S. because of natural gas pipeline constraints during cold snaps. This pattern will persist until more renewables can be used to meet demand. Gas prices in the ISONE area have been the highest since the Polar Vortex of 2014 and January was the 23rd coldest month on record for the region.
International & Domestic Gas Update
The CMG team discussed international factors affecting natural gas prices including the impact of the Russia-Ukraine conflict and Ukraine’s importance to not only Russia, but to the rest of Europe as well. Domestically, the team discussed the impacts of the U.S. becoming the largest global LNG exporter.
Pricing Trends
Is there a Q1 pullback coming our way?
The CMG team answered questions submitted by the audience.
We invite you to join us for our next Energy Market Intel Webinar where Constellation energy experts 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.