Webinar Analysts: Summer Outlook, Geopolitical Impacts on Energy Markets and Capacity Auction Insights
During Constellation’s May Energy Market Intelligence Webinar, the Commodities Management Group (CMG) provided an overview of current and future factors shaping the energy landscape, including a preview of summer weather, geopolitical factors influencing energy prices, Regional Greenhouse Gas Initiatives (RGGI), MISO capacity market results, PJM BRA capacity auction insights and ERCOT’s latest load forecast.
Weather Outlook
The weather discussion focused on a developing El Niño weather pattern pointing to cooler risks across the eastern U.S. and a stronger, more persistent heat ridge in the West. The East could still see periods of significant or even record heat, though conditions are expected to ease quickly between events.
A major concern was drought and dry soil moisture, with roughly 75% of the country under some level of drought and the worst conditions in the Rockies and Southeast. Very dry ground can intensify heat, as less moisture is available to absorb solar energy, increasing the risk of sharper heat waves, especially in the East; as was seen in the Mid-Atlantic region the week of May 18th.
All Things Economic
The team discussed the Regional Greenhouse Gas Initiative (RGGI), a state-run carbon trading program that effectively adds a carbon cost to fossil-fuel power generation in participating states to support lower- or zero-carbon resources such as nuclear, wind and solar, along with efficiency programs. Virginia is rejoining the initiative, which is significant given the state’s large and growing power demand, including from AI-related load. That added demand for carbon allowances has helped push RGGI prices up by about $20 per ton, which puts upward pressure on wholesale energy prices in participating states.
Geopolitical Impacts on Energy Markets
Geopolitical events and the closure of the Strait of Hormuz have disrupted global energy markets. The Strait has experienced a significant decline in transit, from roughly 110 ships a day to essentially zero, creating a large backlog of stranded vessels and limiting the amount of oil reaching the market. While some crude has been rerouted through existing pipelines, this has only partially offset the disruption. As a result, there has been a loss of supply to global markets, including hundreds of millions of barrels of crude and refined products and a significant share of LNG trade.
The speakers emphasized that the impact went far beyond crude oil. They described a ripple effect across gasoline, diesel, jet fuel and LNG markets, contributing to higher prices, tighter inventories and potential shortages in vulnerable regions. Europe was highlighted as especially exposed with respect to jet fuel, while parts of Asia were identified as highly vulnerable because of limited LNG storage and reliance on timely shipments. Overall, the message is that the Strait of Hormuz disruption has created significant price increases, tightening global supply chains, stressing inventories and increasing the value of more secure sources of supply such as U.S. LNG.
Natural Gas Fundamentals
The natural gas fundamentals discussion pointed to a market that still looks relatively well supplied today but is beginning to tighten at the margin. U.S. gas production remains high at roughly 108.7 Bcf/day, up year over year, but output has pulled back from its spring peak as lower prices, producer discipline and maintenance have reduced volumes.
At the same time, LNG demand is becoming a major structural driver, with Golden Pass Train 1 already ramping up and additional projects are expected to add about 7 Bcf/day of new demand by the end of 2028. That has increased confidence that U.S. gas will remain globally important, especially as buyers see U.S. supply as more secure than other alternatives.
Regional ISO Updates
In PJM, the focus was on energy prices, the extension of the capacity auction price collar and rising demand, especially from data centers, alongside uncertainty around how quickly new generation can get built. The team noted a large interconnection queue and significant proposed new supply, but highlighted constraints such as turbine availability, construction timelines, regulatory risk and whether capped auction prices are strong enough to support investment. They also noted how tight conditions have become, including emergency authority to curtail large loads or require backup generation during stressed periods.
In MISO, conditions have improved compared to last year’s extreme scarcity, but the system is still tight, especially in the northern region. Just over 5 GW of new solar, gas and battery capacity helped lower auction prices, yet reserve margins remain thin and a hot Midwest summer or forced outages could quickly put additional pressure back on the system.
In ERCOT, a large but uncertain load growth forecast was discussed, driven by data centers and other large loads. While some projections may be overstated, they still point to significant long-term growth. The key question is whether transmission, generation, gas supply and water infrastructure can keep pace.
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, June 17 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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