Market Overview
As we approach the withdrawal season, the energy market is experiencing significant shifts that could impact prices and supply in the coming months. This week’s newsletter focuses on key factors affecting the natural gas and electricity markets, including supply trends, LNG demand, weather patterns, and future price projections.
Natural Gas Supply and Storage
The natural gas supply remains robust as we near the end of the injection season. Current projections indicate that we will finish less than 50 Bcf below the record for gas storage entering the withdrawal season. In the next four weeks, we anticipate stronger injections, with an additional 94 Bcf over the five-year average expected during this period.
NATURAL GAS STORAGE REPORT
Election Impact on Oil and Gas Storage
While the recent election’s effect on oil and gas storage remains uncertain, it’s worth noting that oil production is already at record levels. Any supply gains may be minimal, as supply and demand fundamentals are likely to prevent a rapid formation of a glut.
LNG Demand
Global Demand Fluctuations
China’s economic slowdown has led to a decrease in LNG demand, which could impact global markets. However, the recent U.S. election is expected to accelerate the permitting process for new LNG facilities. This development could lead to higher prices if production fails to keep pace with increasing demand in the coming years.
INJECTIONS COMPARED TO THE FIVE-YEAR AVERAGE
Weather and Climate Trends
Forecasters anticipate that 2024 will be the hottest year on record, marking the second consecutive year of record-breaking heat. The ten hottest years on record have all occurred within the last 15 years, highlighting the ongoing trend of global warming.
NATURAL GAS PRODUCTION REPORT
NATURAL GAS EXPORTS: LNG & MEXICO
NYMEX ROLLING PROMPT MONTH
Electricity Market Outlook
PJM Auction Results and Future Projections
Due to recent PJM auction results, electricity costs are expected to increase by approximately 15-20% in June 2025. Morgan Stanley forecasts an additional 157% increase in capacity by mid-2026. Several factors drive these projections:
- Incoming AI manufacturing
- Increased electrification
- Growth in electric vehicle adoption
These factors are straining the electric grid, with Morgan Stanley predicting significant demand-side increases over the next three years and supply closures during the same period.
Strategies for Energy Consumers
To mitigate the impact of rising electricity costs, consider the following strategies:
- Energy Hedging: Potential for a 15% decrease compared to fixed rates
- Alternative Energy Solutions: Explore renewable options
- Operational Improvements: Focus on reducing peak building usage
- Energy Audits: Engage with energy experts for free onsite assessments
AD HUB FORWARD POWER PRICES (ATC)
Conclusion
The energy market is experiencing significant change, with potential price increases on the horizon. Stay informed and consider implementing proactive strategies to manage your energy costs effectively. As always, consult with energy experts to determine the best approach for your needs.
