Energy Management

Winter Energy Market Outlook: 3 Things You Need To Know

3 min read

Winter is on the horizon, bringing concerns about frigid temperatures, natural gas supply and other factors to the forefront.

Constellation’s energy management experts discussed the winter energy market outlook in our latest webinar and the impact these factors may have on energy budgets.

(If you missed the webinar, you can watch a recording of it here.)

If you are responsible for managing and purchasing energy for your organization, here are three things you need to know.

1. The Natural Gas Market Is Back in Balance… for Now.

This past year began with natural gas prices hitting record lows due to a supply surplus. Strong demand and a decline in production allowed it to balance out this past summer. As we head into winter, NYMEX prompt month gas prices are in the $2.50 to $3 range. Cal ‘18-20 NYMEX prices hold steady near $3. Cal ‘17-20 forward power prices in the Northeast are only 5 percent above all-time lows; prices in California and the Midwest (MISO region) are at 8 percent above all-time lows.

A few factors could impact the natural gas market this winter, including:

  • Colder-than-average temperatures projected in the East and Midwest
  • Leftover winter warmth from the last El Nino, which could counteract cold temperatures and dampen heating demand
  • Underground gas inventories at or near 4 Tcf
  • Natural gas injections (year-to-date injections are currently 43 percent below last year and 36 percent under the five-year average)

2. La Nina to Bring Cold, Wet Weather for North; Warm and Dry for South.

The National Oceanic and Atmospheric Administration (NOAA) recently issued its U.S. Winter Outlook, which predicts a La Nina weather patterns. That means the winter is likely to be colder and wetter than normal for the northern part of the country, from Montana to Michigan and the Great Lakes region, and warmer and drier for the southern U.S.

The rest of the country has an equal chance of experiencing temperatures and snowfall that are above or below normal, as climate signals aren’t strong enough to indicate either direction at this time.

Webinar Recap Image 1.jpg

3. Power Prices Are Rallying.

The chart below shows the six-month trend of forward power prices as of Oct. 14.

Webinar Recap Image 2.jpg

Cal ‘17 forward power prices have rallied ahead of winter, but they level off in later years. Customers who lock in power prices now with long-term contracts can manage their average energy costs in the years to come.

Energy Price Trends and Procurement Strategies

A long-term contract is just one way to take advantage of current energy pricing trends. Customers can also take advantage of market fluctuations with energy purchasing strategies that allow them to buy natural gas and power a little at a time, rather than all at once. This strategy is similar to dollar-cost averaging in investing.

Constellation’s experts can monitor the energy market and your historic usage, helping you identify the best times to buy.

To learn more about choosing an energy purchasing strategy for 2017 and beyond, contact us today.

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