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Weekly Energy Industry Summary

Commodity Fundamentals

Week of November 18, 2024

By The Numbers:

  • NG '24 prompt-month NYMEX settled at $2.97/MMbtu, up $.15/MMbtu, on Monday, November 18. 
  • WTI '24 prompt-month crude oil settled at $69.16/bbl., up $2.14/bbl., on Monday, November 18.

Natural Gas Fundamentals - Neutral/Bullish

  • Prompt-month NYMEX natural gas futures settled at $2.97per MMbtu, up $.15 per MMbtu on Monday, November 18.
  • Some uncertainty in the weather pattern flashing potential for colder temperatures in the east later next week added some support and upside to prompt-month gas.
  • Natural gas production, month-to-date, averaged 100.5 Bcf per day, versus 104.8 Bcf per day for the same period last year.
  • Electric power generation demand for gas, month-to-date, averaged 32.5 Bcf per day versus 31.4 Bcf per day for the same period last year.
  • LNG exports month-to-date averaged 13.3 Bcf per day versus 14.2 Bcf per day for the same period last year.
  • Natural gas exports to Mexico, month-to-date , averaged 5.8 Bcf per day versus 5.7 Bcf per day for the same period last year.
  • Natural gas strip prices, 2025-2029 are; $3.16, $3.67, $3.70, $3.58, and $3.40 per MMbtu respectively.
  • Natural gas storage inventories are 3.97 trillion cubic feet; a level considered nearly "full" entering winter.

Crude Oil - Neutral

  • The events and geopolitical tensions remain in this market, however, after a year of war in the Middle East, there has been little to suggest a supply-disruption to global markets.  There is still a lot of risk in this area, however, until it presents itself, the "bullish" moniker that had been in place will now swing with near-term market fundamentals.
  • Crude oil settled at $69.16 per barrel, up $2.14 per barrel.
  • A power outage at Norway's Johan Sverdrup oil field in the North Sea shut down output there yesterday helping to move crude to the upside.  Gains in crude were also attributed to concerns over escalation in the Russian Ukraine war involving Ukraine's use of long-rage ballistic missiles.
  • This morning it was reported that Norwegian production was back online.
  • Two undersea cables in the Baltic Sea were cut yesterday -- another signal regarding the Russia/Ukraine war and a reminder that geopolitical tensions remain high.

Economy - Neutral

  • The U.S. economy grew 2.8% last quarter.
  • Fed Chairman Powell says a solid economy allows the Fed to consider rate cuts "carefully."
  • President-Elect Trump has selected many of the people for his cabinet.
  • President-Elect Trump chose Chris Wright, CEO of Denver based Liberty Energy as Secretary of Energy.  Wright will also serve on the newly formed Council of National Energy, which Trump said will consist of all agencies involved in the permitting, production, generation, distribution, and regulation of energy.

Weather - Neutral/Bullish

  • This week it will be warmer in the east and cooler in the west.  There is some colder air building in western Canada that will likely change the pattern a bit later next week.  Some models are shifting to allow more colder air -- not bitter cold but colder than has been presented this month-to date -- by the end of the month.  The weather models are potentially shifting a bit allowing for more storminess in the pattern in December.

Weekly Natural Gas Report:

 
  • Inventories of natural gas in underground storage for the week ending November 8, 2024 are 3,972 Bcf; an injection of 41 Bcf was reported for the week ending November 8, 2024.
  • Gas inventories are 226 Bcf greater than the five-year average and 156 Bcf greater than the same time last year. 
Values reflect week ending Nov. 15, 2024
Prices reflect week ending Nov. 15, 2024

Weekly Power Report:

Mid-Atlantic Electric Summary

  • The Mid-Atlantic Region’s forward power prices were slightly higher last week in-line with some of the price support in natural gas prices resulting from a temporary drop in production as well as colder temperature forecasts at the time.  We had a demand loss in the weather models over the weekend, driven by warmer trends across the South and East this upcoming weekend and into next week.  An unseasonably mild start to the week will be seen across the eastern half of the nation before a cold front will bring in more seasonable to colder leaning temperatures later this week and into this weekend.  Another warm-up is then shown in the models next week with widespread above normal temperatures likely across the South and East.  Future power prices from 2025-2029 were 2% higher over the past week in the Mid-Atlantic, while the monthly change also showed a 2% increase as well.  The outer years, 2027-2029, continue to receive support from longer-term reliability issues around increased data center demand and the pace of new build generation.  Day-ahead index prices in West Hub for November are currently averaging $29.62/MWh, which is -16% lower than the October final settlement price average and -26% lower than last year’s November’s average. 
  • PJM Discusses Capacity Market Changes - On 11/7 at a Special Markets and Reliability Committee, PJM presented what it plans to include in a December filing at FERC to implement further changes to the PJM capacity market. PJM intends to include three topics in the filing: (1) PJM proposes switching back to a combustion turbine as the reference resource for the capacity market demand curve.  The switch will make the demand curve less sensitive to modeled forward energy and ancillary service revenue and will decrease the steepness of the demand curve; (2) PJM plans to implement a uniform non-performance charge rate across the region with a floor value to avoid low or zero non-performance charge rates; and PJM intends to include the Brandon Shores and Wagner reliability must run (RMR) units as generic supply in the capacity market if each unit meets specified resource adequacy criteria.  PJM plans to use the capacity revenues associated with RMR resources to offset charges for entities paying for the RMR agreements.

Great Lakes Electric Summary

  • The Great Lakes Region’s forward power prices were slightly higher last week in-line with some of the price support in natural gas prices resulting from a temporary drop in production as well as colder temperature forecasts at the time.  We had a demand loss in the weather models over the weekend, driven by warmer trends across the South and East this upcoming weekend and into next week.  An unseasonably mild start to the week will be seen across the eastern half of the nation before a cold front will bring in more seasonable to colder leaning temperatures later this week and into this weekend.  Another warm-up is then shown in the models next week with widespread above normal temperatures likely across the South and East.  Future power prices from 2025-2029 were 2% higher over the past week in the GLR, while the monthly change showed a mere 2% increase for those terms.  The outer years, 2027-2029, continue to receive support from longer-term reliability issues around increased data center demand and the pace of new build generation.  Day-ahead index prices in ComEd for November are currently averaging $21.61/MWh, which is -17% lower than the October final settlement price average and -13% lower than last year’s November’s average, while in AdHub that average month-to-date price is currently $28.15/MWh or -15% lower than last month as well as -12% lower than last year for this month. 
  • PJM Discusses Capacity Market Changes - On 11/7 at a Special Markets and Reliability Committee, PJM presented what it plans to include in a December filing at FERC to implement further changes to the PJM capacity market. PJM intends to include three topics in the filing: (1) PJM proposes switching back to a combustion turbine as the reference resource for the capacity market demand curve.  The switch will make the demand curve less sensitive to modeled forward energy and ancillary service revenue and will decrease the steepness of the demand curve; (2) PJM plans to implement a uniform non-performance charge rate across the region with a floor value to avoid low or zero non-performance charge rates; and PJM intends to include the Brandon Shores and Wagner reliability must run (RMR) units as generic supply in the capacity market if each unit meets specified resource adequacy criteria.  PJM plans to use the capacity revenues associated with RMR resources to offset charges for entities paying for the RMR agreements.

Northeast Energy Summary

  • On November 14, the Massachusetts legislature passed both the omnibus economic development and omnibus climate bills.  These bills stalled in July when there were disagreements between the House and Senate over certain provisions.  Legislators reached agreement after months of negotiations by the conference committees, and both bills are expected to be signed by the Governor. The omnibus climate bill focuses on siting and permitting reform for clean energy infrastructure in the state, but also inserts nuclear in the definition of clean energy and allows existing nuclear plants in ISO New England to compete for the state’s clean energy procurements. As well as other incremental market enhancements, such as accelerated switching for residential and small commercial customers with advanced metering (AMI) deployment, contract portability, and providing suppliers access to AMI data.
  • The NYISO recently issued its annual winter assessment, showing sufficient resource availability and winter capacity margins assuming all firm fuel generation is available under normal and extreme weather conditions.  The assessment found 29,514 MW of power resources are available to meet a forecasted peak demand of 23,800 MW. Last winter, peak demand reached 22,754 MW on January 17, 2024. The all-time record for winter peak demand was 25,738 MW on January 7, 2014.  The assessment did find, however, that future reductions in winter capacity margins, disruptions in fuel supplies or other winter operational concerns may result in operational challenges given the reliance on firm fuel generation during extreme cold weather events, especially as the state transitions to a winter peaking system in the mid-2030s.  NYISO stated strong coordination between gas suppliers, grid operators and state agencies will be ongoing this winter.

ERCOT Energy Summary

CAISO, Desert Southwest and Pacific Northwest Energy Summary

  • Forecast trends over the weekend generally came in the colder direction across the West, especially across Western Canada where the models are suggesting the coldest air of the season begins to build in later this week. A very stormy pattern will be seen over the course of the next 7 – 10 days and likely rolling into early December with significant snowfall possible across both the Columbia Basin and Northern California. The colder temps shift the precipitation from rainfall to snowpack with the Sierra Mountains seeing their first accumulation of the season. Hydro storage levels are robust given the two consecutive high snowpack years have allowed dam operators to stretch water supplies through the year. The most noticeable shift in the model runs over the weekend came across Western Canada where winter like cold is forecast to build in late week dropping the daytime highs into the teens in Calgary with overnight lows in the single digits. While this doesn’t necessarily change Western U.S. energy demand at the moment, the stormy pattern introduces some variability and puts the winter temperatures right on the doorstep of our interests.
  • Cash gas prices saw the Monday effect take hold as they popped higher, PG&E’s gate to the city was lifted $1.33 in trading yesterday to settle at $4.397 per MMBtu for flow today. SoCal city gate was up to $2.85 MMBtu after having cleared for the weekend package a little over the $2 mark. That there are sustained colder temperatures across NorCal at the same time pipeline maintenance remains constrained into PG&E with restrictions at Redwood and Kingsgate not seeing relief until this weekend. This will likely lead to another day of lopsided cash pricing meaning PG&E settles way over SoCal city gate, possible that by Wednesday the warmer temperatures may be enough to tip the scale back to bearish pricing. In SoCal, power burns continue to look low with a string of low demand days as well as deep stack of thermal units on outage above the norm for mid-November in recent years. Natural gas storage as we start the heating season is welcoming any weather that will encourage molecules to move out; PG&E’s caverns are showing 178 Bcf in the tank, about 15 Bcf above last year, while SoCal’s system is showing 107 Bcf which is higher year over year by about 2 Bcf.
  • A pattern of storminess across particularly the northern part of the state will bleed far enough south to put clouds across SoCal later this week and into this weekend limiting solar production and bringing some balance back to the wide spreads seen in the day ahead prices at the CAISO for the peak hours each day. The wealth of solar production has also driven prices negative repeatedly in recent days as temperate weather and clear skies allows the projects to swamp the system with megawatt hours in the midday which is when the binding constraint erupts across Path 15. We are watching the California power plant outages closely as the colder weather will reshape the hourly demand profile with the morning ramp rising while the evening ramp is steeper.
  • As the market has absorbed the news from the election results, there are some notable decisions across the California landscape. Morro Bay residents approved Measure A-24, which amends local zoning laws to prevent the development of a battery storage facility at the former Morro Bay Power Plant site. The measure specifically prohibits “unless approved by voters, any changes to land use designations of Visitor-Serving Commercial and/or Commercial/Recreational Fishing, for approximately 103 acres of real property (including by the harbor east of Morro Rock, 63 acres of former power plant, portions along sides of Embarcadero Road from Beach Street to Atascadero Road, and along Coleman Drive).” This directly impacts the proposed 600 MW battery storage project by Vistra. Opposition to the Vistra project escalated following two battery storage fires at the Moss Landing plant in 2021 owned by Vistra and another fire at the adjacent Tesla battery storage facility in 2022. Additional concerns were raised based on incidents in San Diego and Escondido. However, the battle is not over yet. Vistra recently paused its local application and announced plans to participate in the AB 205 opt-in process. Projects that conform to AB 205 criteria can have their applications reviewed by the California Energy Commission (CEC) rather than local authorities. For example, the Fountain Wind Project opted for the AB 205 review after being denied by the Shasta County Board of Supervisors in 2022. Similarly, the Compass Battery Storage project, proposed for years in San Juan Capistrano, could not secure a zoning change in 2021 but chose to enter the AB 205 process in July of this year. Vistra is now seeking to have the CEC conduct the review, potentially allowing the state to override local zoning regulations.

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