Print

Note: We will not be sending the Energy Market Update the weeks of December 23 and December 30, 2024 due to the holiday.

Weekly Energy Industry Summary

Commodity Fundamentals

Week of December 16, 2024

By The Numbers:

  • NG '24 prompt-month NYMEX settled at $3.21/MMbtu, down $.07/MMbtu, on Monday, December 16. 
  • WTI '24 prompt-month crude oil settled at $70.71/bbl., down $.58/bbl., on Monday, December 16.

Natural Gas Fundamentals - Neutral

  • Prompt-month NYMEX natural gas futures settled at $3.21 per MMbtu, down $.07 per MMbtu on Monday, December 16.
  • Prompt-month NYMEX natural gas has barely moved from last week's settlement of $3.17 per MMbtu.
  • A variable weather pattern with some cold air moving quickly across the Midwest to the East, followed by warm-up periods is keeping gas well in check as the second half of December begins.
  • Natural gas production, month-to-date, averaged 103.9 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 34.9 Bcf per day versus 33.1 Bcf per day for the same period last year.
  • LNG exports month-to-date averaged 13.8 Bcf per day versus 14.7 Bcf per day for the same period last year.
  • Natural gas exports to Mexico, month-to-date , averaged 6.0 Bcf per day versus 5.5 Bcf per day for the same period last year.
  • Natural gas strip prices, 2025-2029 are; $3.19, $3.76, $3.78, $3.67, and $3.57 per MMbtu respectively.
  • Plaquemines LNG, the newest LNG export terminal, has commenced natural gas deliveries with feedgas volumes of 0.2 Bcf per day.  

Crude Oil - Neutral

  • NYMEX (WTI) crude oil futures settled at $70.71 per barrel on Monday, December 16, down $.58 per barrel.
  • The news on China's economy continues to be bearish of crude oil demand in the near and mid-term.
  • OPEC plus is mulling over its next move whether to cut production to support pricing, keep output the same or modestly increase output in the teeth of tepid global demand.
  • Several news outlets are reporting that the crude oil market is waiting on whether the U.S. Federal Reserve Bank will cut rates further; it is unclear as to why a rate cut would have any material effect on the macro crude oil market.
  • The crude oil market has been a broken record for months: Soft demand in Asia and Europe, sufficient spare global capacity, a range-bound market.

Economy - Neutral

  • U.S. industrial production decreased 0.1% in November, the third straight month of declines, the Fed said.
  • Wholesale prices rose 0.4% in November, more than expected CNBC reports.
  • The U.S. budget deficit swelled in November, putting fiscal 2025 at a faster pace than last year when the deficit topped $1.8 trillion.
  • Households expecting their financial situation to be better a year from now jumped to 37.6%, the highest since before the Covid pandemic.
  • Trump trade counselor Peter Navarro says planned tariffs won't spur inflation.
  • On a more international note: Canada's government appears to be on the verge of collapse -- Germany's government has collapsed -- France's government has collapsed -- The UK government is on a path to a "no confidence" vote as well. A reset among western nations is underway.

Weather - Neutral/Bearish

  • A short-lived cold front will move through the Midwest this week and through the weekend.
  • The cold front will be followed by a warmup to above-normal in the eastern half of the country.
  • There are some signals that January may be colder than previously forecast, but the proof will be "in the pudding" so to speak.

Weekly Natural Gas Report:

 
  • Inventories of natural gas in underground storage for the week ending December 6, 2024 are 3,747 Bcf; a withdrawal of 190 Bcf was reported for the week ending December 6, 2024.
  • Gas inventories are 165 Bcf greater than the five-year average and 67 Bcf greater than the same time last year. 
Values reflect week ending Dec. 13, 2024
Prices reflect week ending Dec. 13, 2024

Weekly Power Report:

Mid-Atlantic Electric Summary

  • The Mid-Atlantic Region’s forward power prices continue to inch upwards despite the consistent variability in the weather patterns.  Natural gas futures were 6.5% higher last week but retreated the last couple of sessions as the market shrugged-off a record high withdrawal from storage last week in favor of milder temperature forecasts and growing production.  The US will remain in a highly variable pattern across the eastern United States over the next couple of weeks. A big warm up over the next few days will be followed by another strong cold front. This brings much below normal temperatures into the forecasts toward the end of this week, with the strongest cold air over the weekend and into early next week. This will be followed by another strong warm up to finish out the month. Future power prices from 2025-2029 were 1% higher over the past week in the Mid-Atlantic, while the monthly change was 4% higher.  There continues to be stronger price support on the back end of the price curve with the 2027-2029 terms averaging a 7% increase over the past month.  Month-to-date, day-ahead index prices in West Hub for December are currently averaging $40.61/MWh, which is 33% higher than last month and 27% higher than a year ago December.
  • Commonwealth’s Largest Coal Plant to Convert to Gas - Officials in Homer City have announced plans to restart the Homer City Generating Station and increase its generating capacity by converting to natural gas.  The Homer City Generating Station was a 2-GW coal-fired plant with three units taken offline for decommissioning in the summer of 2023.  Robin Gorman, vice president of Homer City Redevelopment LLC, said converting the closed coal plant to burn natural gas could potentially double the plants production capacity, which would make it the largest natural gas-fired power plant in the U.S. Gorman also said the use of hydrogen, and installation of solar power, could be possible in the future.

Great Lakes Electric Summary

  • The Great Lakes Region’s forward power prices continue to inch upwards despite the consistent variability in the weather patterns.  Natural gas futures were 6.5% higher last week, but fell the last couple sessions as the market shrugged-off a record high withdrawal from storage last week in favor of milder temperature forecasts as well as growing production.  The US will remain in a highly variable pattern across the eastern United States over the next couple of weeks.  A big warm up over the next few days will be followed by another strong cold front. This brings much below normal temperatures into the forecasts toward the end of this week, with the strongest cold air over the weekend and into early next week. This will be followed by another strong warm up to finish out the month.  Future power prices from 2025-2029 were 1% higher over the past week in the Mid-Atlantic, while the monthly change was 6% higher.  There continues to be stronger price support on the back end of the price curve with the 2027-2029 terms averaging an 8% increase over the past month.  Month-to-date, day-ahead index prices in ComEd for December are currently averaging $26.89/MWh, which is 19% higher than last month and 43% higher than a year ago December, while AdHub index prices thus far are averaging $38.14/MWh which is 30% higher than last month and 41% higher than last year for this month.
  • PJM’s Preliminary 2025 Load Forecast Driven by Data Center Load - PJM’s preliminary 2025 load forecast includes increases relevant for the 2026/27 capacity auction scheduled for July 2025.  The forecasted peak demand for 2026 of 159.5 GW is an increase of ~2.7 GW compared to the 2024 forecast while the winter peak increased by over 5 GW and will create upward pressure on the Installed Reserve Margin calculation.  The increased forecasts are driven primarily by data center loads and are more significant by 2030 with summer peak forecasted 16.6 GW higher than it was just a year ago and the winter up by 22.3 GW.  PJM plans to finalize 2025 load forecast in January.

Northeast Energy Summary

  • On the December 10 NEPOOL Market Committee meeting the ISO New England (ISO-NE) reviewed its proposed Capacity Auction Reform (CAR), transitioning the Forward Capacity Market to a prompt auction. This month ISO-NE highlighted the benefits and key design elements of a prompt auction, provided updates on follow-up items, and outlined the planned stakeholder engagement process and timeline for implementing the reforms. CAR benefits discussed include: 1) Elimination of phantom entry or delayed operation of resources by holding auctions closer to delivery period. 2) Use of more contemporary forecasts for the commitment period, such as capacity demand curves, and accreditation values. 3) Allows capacity suppliers to provide more up-to-date information, including their operational capability and anticipated system and market conditions, assisting them to make more informed decisions about items such as price offers or PFP risk.
    • ISO-NE introduced and sought initial stakeholder feedback on the key elements of a prompt auction design. Each element is to be taken up in more detail beginning with the January 2025 MC meeting. The key elements include: new retirement and deactivation process, changes to the auction and bid/offer structure, assessment of competitive price formation and mitigation, revisions to (and simplification of) the new capacity qualification process, and creation of a more condensed, simplified auction activity schedule. ISO-NE to begin discussion on retirements or deactivation process at the January 14 -15, 2025 Market Committee meeting.
  • Earlier this month, New York Governor Hochul announced NYSERDA has contracted with 23 renewable projects totaling more than 2,300 MW of onshore renewables.  The awards stem from NYSERDA’s 2023 solicitation aimed to replace more than 7,000 MW worth of canceled contracts where developers backed out of most deals after the Public Service Commission rejected their petitions seeking increases to existing contracts.  The average bill impact for customers over the life of the newly awarded contracts will be approximately $0.70 per month with a nominal weighted average strike price of $94.73 per MWh.  The corresponding RECs will be offered by NYSERDA to the voluntary REC market with the remaining unsold balance becoming a mandatory obligation for all load serving entities in the state.  The awarded projects include 20 solar and three offshore wind generators.  NYSERDA took bids on the next round of renewable awards in August, and those announcements are expected in Q2 of next year.

ERCOT Energy Summary

CAISO, Desert Southwest and Pacific Northwest Energy Summary

Above normal temperatures are widespread in the outlook for the remainder of December, the exception being the weather pattern had some weirdness to it as San Francisco saw its first tornado warning over the weekend. Forecast models overall remain in good agreement for very limited colder air in the pattern moving forward, supporting widespread oranges and reds on the maps and dashing hopes for a white Christmas for all but the highest elevations chimneys. The storm track does look very active in the Pacific NW and NorCal at times for the foreseeable future meaning there should be notable snowpack gains across both British Columbia and the lower Columbia Basin at the mid to upper elevations. Bottom line, warmer than normal temperatures will dominate the pattern through the remainder of the year and solar production should be abundant in the southern part of the state.

We started the week with news that Gas Transmission Northwest (GTN) issued a high operational flow order (OFO) effective through Saturday, as maintenance along this 1400-mile line that brings Canadian gas into the Pacific NW will be reduced. It looks like flows along parts of the line will be reduced to 1.7 Bcf, about 100 Mcf fewer than normal, but enough of a curtailment to lift daily PG&E city gate prices above those at SoCal. For the past few weeks, we’ve seen the SoCal city gate index clear above PG&E as storage in this territory is packed to the rafters with about 20 Bcf more than the 148 Bcf the caverns held one year ago. Reducing some of the import capability will be enough to restore the natural order to prices returning PG&E city gate to the highest priced hub in California. Regardless, without a colder start to winter, the natural gas storage landscape across the West is the healthiest it has been in years. The best hope for gas demand that would otherwise be quite low is that plenty of gas-fired gens will need to hang out running at the Pmin levels each day so they can replace solar for an evening ramp period the begins in the late afternoon this time of year. Other factors that will come into play for prices as we look towards the new year is that the Golden State is working on its third straight year of a healthy hydro system, which has allowed facility operators to match output to the appropriate hourly price signal. This will be needed over the next few weeks as temperatures in the LA Basin will reduce heating demand and clear skies will deliver robust midday solar production meaning the binding constraint that wallops SP15 prices relative to NP15 during the peak period each day will return.

Shortly before we went to press the breaking news was the Biden administration agreed to provide a record $15 billion low-interest loan commitment to PG&E to finance hundreds of projects aimed at fighting the effects of climate change and improving the electrical grid. The loan by the Energy Department’s Loan Programs Office (LPO) is slated to fund projects that refurbish PG&E’s hydroelectric infrastructure and upgrade power lines to support renewable energy projects, data centers and electric vehicles. The race is on to close this deal before January 20th, as officials with the LPO said that because the loan is a legal contract, future administrations wouldn’t be able to claw back the funds. Under the terms of the loan, wildfire-mitigation projects aren’t directly eligible for funding, but projects that simultaneously target grid safety and reliability could qualify. That might be the bright spot for this outsized deployment of tax dollars, wildfire mitigation efforts have an uncertain track record.

Stay up-to-date on the latest energy news and information:

Coming soon from Constellation Customer Insights: Help us provide you with greater service by completing our online study later this month. For a limited time, eligible customers can choose to accept an incentive for taking the time to provide feedback.

  • Energy Market Intel Webinar - Register for our next market update webinar on Wednesday, January 15 at 2 p.m. ET when the CMG team will provide insights on market factors currently affecting energy prices, such as weather, gas storage and production, and domestic and global economic conditions.
  • Fortunato & Friends Webcast - Stay tuned for more information on our 2025 Fortunato & Friends webcast series! 
  • Energy Terms to Know - Learn important power, gas and weather terms.
  • Sustainability Assessment - We invite you to complete a brief assessment that helps us learn where your company is in building and/or implementing a sustainability plan. Through these insights, Constellation can customize solutions to meet your needs.
  • Subscription Center - Sign up to receive updates on the latest market trends.

Questions? Please reach out to our Commodities Management Group at CMG@constellation.com.