Weekly Energy Industry Summary

Commodity Fundamentals

Week of November 4, 2024

By The Numbers:

  • NG '24 prompt-month NYMEX settled at $2.78/MMbtu, up $.12/MMbtu, on Monday, November 4. 
  • WTI '24 prompt-month crude oil settled at $71.47/bbl., up $1.98/bbl., on Monday, Novembver 4.

Natural Gas Fundamentals - Neutral/Bearish

  • Prompt-month NYMEX natural gas futures settled at $2.78 per MMbtu, up $.12 per MMbtu on Monday, November 4.
  • Natural gas production, month-to-date, averaged 100.9 Bcf per day, versus 104.1 Bcf per day for the same period last year.
  • Electric power generation demand for gas, month-to-date, averaged 32.4 Bcf per day versus 30.9 Bcf per day for the same period last year.
  • LNG exports month-to-date averaged 12.1 Bcf per day versus 14.2 Bcf per day for the same period last year.
  • Natural gas exports to Mexico, month-to-date , averaged 6.2 Bcf per day versus 6.4 Bcf per day for the same period last year.
  • Natural gas strip prices, 2025-2029 are; $3.05, $3.60, $3.67, $3.64, and $3.52 per MMbtu respectively.
  • Production is down, but demand is down as well from the same period last year.  The largest offset is the weather -- a very warm start to November is keeping the gas market well in check.

Crude Oil - Bullish

  • The events and geopolitical tensions remain in this market providing the potential for upside in crude oil. For this reason, the headline on the market condition of crude oil remains "Bullish" until further notice.
  • Crude oil settled at $71.74 per barrel, up $1.98 per barrel.
  • Crude sold off hard last week as Israel did not attack Iranian oil assets and that option seems to be off the table -- for now.
  • Global demand is relatively weak.
  • China is in a recession.
  • Europe is generally recessionary or very weak in terms of growth.
  • The U.S. is chugging along at about 2.5 to 3.0 percent GDP growth.
  • All eyes turn to the results of the election.

Economy - Neutral

  • The U.S. added 12,000 jobs in October -- a poor performance by any measure.
  • Prior month jobs are being revised downward.
  • Unemployment remained unchanged at 4.1%.
  • Boeing ended the machinist strike and workers are set to return.
  • U.S. GDP rose 2.8% in the third quarter.
  • New vehicle sales for September came in at 1.17 million units, down 13% year-over-year, Cox Automotive reported.
  • New vehicle sales for 2024 are forecast at 15.8 million.
  • New housing starts continue to be weak coming in at 1.37 million units annualized -- that's down from 1.71 million units in January of 2022.  Higher interest rates and higher construction costs are crimping the housing market.
  • All eyes now turn to the Presidential election.

Weather - Bearish

  • A warm dominated eastern half of the country is in the cards.
  • A chilly west is forecast for the 11-15 day outlook.
  • Tropical storm Raphael is developing near Cuba, and will move into the Gulf of Mexico where conditions are not favorable for further development.

Weekly Natural Gas Report:

 
  • Inventories of natural gas in underground storage for the week ending October 25, 2024 are 3,863 Bcf; an injection of 78 Bcf was reported for the week ending October 25, 2024.
  • Gas inventories are 178 Bcf greater than the five-year average and 107 Bcf greater than the same time last year. 
Values reflect week ending Nov. 1, 2024
Prices reflect week ending Nov. 1, 2024

Weekly Power Report:

Mid-Atlantic Electric Summary

  • The Mid-Atlantic Region’s forward power prices seem to be following a similar pattern over the past number of weeks, as little weather risk in the East continues to weigh on natural gas prices as well as near-term power futures.  The December NYMEX natural gas contract price immediately dropped as it became the new prompt-month contract with no real support in the market.  The overall weather pattern remains the same with a warm dominated East and chilly West, but the models are struggling to pick up on any chilly air coming out of the West. The issue is that these air masses lose their punch as they traverse across the Midwest and East and are transient. To get more meaningful cold in the pattern, we would need to see colder air come from the North with blocking involved.  Despite the bearishness in the near-term markets, power futures continue to find price support on resource adequacy fears further-out on the price curve.  Future power prices were 1% higher again over the past week in the Mid-Atlantic, with the near-term 2025/26 strips -1% lower, while the 2027-2029 strips 2% higher.  Over the past month, those forward strips saw more price support on the later years with the 2027/29 terms trading 9% higher, while the prompt-year 2025 traded -2% lower.  Final day-ahead index prices in West Hub for October averaged $33.35/MWh, which is 8% higher than September’s final settlement price average, but -5% lower than last year’s October average.
  • PJM Capacity Market Design: Potential Content for December Filing - On 10/15, PJM filed a waiver at FERC to delay the capacity auction for the 2026/27 delivery year, currently scheduled for December, to both address a complaint from Sierra Club and others requesting that FERC direct PJM to include Reliability Must Run (RMR) units (Brandon Shores and Wagner) in the capacity market and discuss with stakeholders other targeted rule changes for the next auction.  PJM subsequently scheduled a special Markets and Reliability Committee (MRC) meeting on 11/7 to discuss the potential December filing with stakeholders and, in advance of that filing, has released a presentation outlining the current plan for contents of the filing and requesting feedback from stakeholders.  Numerous design elements are in discussion at PJM but only three are expected to be included in the December filing – the reference technology, the $0 Net Cost of New Entry (CONE) concern, and the contribution of RMR units in the capacity market.

Great Lakes Electric Summary

  • The Great Lakes Region’s forward power prices seem to be following a similar pattern over the past number of weeks, as little weather risk in the East continues to weigh on natural gas prices as well as near-term power futures.  The December NYMEX natural gas contract price immediately dropped as it became the new prompt-month contract with no real support in the market.  The overall weather pattern remains the same with a warm dominated East and chilly West, but the models are struggling to pick up on any chilly air coming out of the West. The issue is that these air masses lose their punch as they traverse across the Midwest and East and are transient. To get more meaningful cold in the pattern, we would need to see colder air come from the North with blocking involved.  Despite the bearishness in the near-term markets, power futures continue to find price support on resource adequacy fears further-out on the price curve.  Future power prices were 1% higher again over the past week in the GLR region, with the near-term 2025/26 strips -1% lower, while the 2027-2029 strips 2% higher.  Over the past month, those forward strips saw more price support on the later years with the 2027/29 terms trading 9% higher, while the prompt-year 2025 traded -2% lower.  Final day-ahead index prices in Michigan for October averaged $28.87/MWh, which is -2% lower than September’s settlement price average as well as -12% lower than last year’s October average., while in Ameren the final price averaged $27.02/MWh or -3% lower than last month and -15% lower than October of 2023.
  • FERC Approves MISO Accreditation Reforms - On 10/25, FERC accepted MISO’s tariff revisions to implement a direct loss of load (DLOL)-based methodology to accredit resources in its Planning Resource Auction, as well as for calculating the Planning Reserve Margin Requirement that Load Serving Entities participating in MISO’s markets must meet.  Unlike MISO’s current accreditation framework - which applies different methodologies to thermal, wind, solar, and storage resources, and is limited to assessing past performance - the DLOL-based framework uses a two-step process that measures a resource’s availability when reliability risk is the greatest based on both a probabilistic and deterministic approach.  In step one, MISO will use 30 years of load and weather data to calculate Resource Class-level performance expectations under various forecasts, to determine a Resource Class capacity allocation.  In step two, MISO will use actual performance over the past three years to allocate the Resource Class capacity down to individual resources within each Resource Class.  In its order, FERC found that MISO “demonstrated that the DLOL methodology captures a range of risks in the planning and operations horizons, aligns operational needs with non-discriminatory market and planning requirements, and will result in transparent market prices that reflect marginal contributions to reliability during highest risk hours.”  Most resource classes will see reduced accreditation values as a result of MISO’s changes.

Northeast Energy Summary

 

  • The New Hampshire Public Utilities Commission (NHPUC) is continuing its review of default service procurement design for the state’s electric distribution companies (EDCs) to ensure that ratepayers are getting the “best pricing and service outcomes.”  NHPUC previously ordered each of the state’s EDCs to create proposals for procuring at least 30% of the residential load for default service from ISO-NE markets.  NHPUC is now indicating that they intend to start a new phase of the default service review by mandating 50% residential load from ISO-NE markets and 30% of small customer load as they claim to be seeing “ongoing evidence that prevailing ISO-New England market prices…were markedly lower than those prices for third-party requirements contracts.”  The New Hampshire Department of Energy has raised concerns over this method of default service procurement, including greater likelihood of over- and under-collection, uncertainty over pricing a 6-month fixed rate when purchasing in real time, and placing returning default customers onto variable rates until the next fixed rate period.  NHPUC stated that these concerns will be addressed during the review this winter.
  • New York Governor Hochul recently announced New York has achieved one of its near-term climate goals: installing 6 GW of distributed solar a year ahead of a 2025 deadline embodied in the state’s signature climate law.  New York officials have indicated the state will not be able to achieve its 70% renewable electricity by 2030 goal and recently announced the cancellation of Attentive Energy’s 1,275 MW offshore wind (OSW) project, proposed three months ago.  Remaining bids from the New York State Energy Research and Development Authority’s (NYSERDA) most recent solicitation include up to 2,800 MW from Community Offshore Wind, a 1,485 MW Long Island wind project backed by Ørsted, and Vineyard Offshore’s 1,350 MW Excelsior Wind.  None of the proposed projects are expected to be fully online by the 2030 deadline.  NYSERDA expects to notify the three remaining bidders of contingent awards by 11/8 but will not disclose details publicly until the contracts are finalized, likely in the first quarter of 2025.  The state has one operating offshore wind project contracted with the Long Island Power Authority — the 132 MW South Fork Wind developed by Ørsted.  Two others have active contracts and are moving forward: Empire Wind 1, an 810 MW project developed by Equinor, and Sunrise Wind, a 924 MW project being built by Ørsted.  Community solar remains the poster child of success for New York’s energy achievements, as relatively steady state subsidies through NY-Sun and declining costs have ensured the health of the industry.  Solar industry advocates and environmental groups have been pushing for the Hochul Administration to consider an even more aggressive target for solar, beyond the 10 GW target currently set for 2030.  They want Hochul to double that to 20 GWs by 2035.

ERCOT Energy Summary

CAISO, Desert Southwest and Pacific Northwest Energy Summary

  • After a record warm October for much of the West, early November is looking very different as rounds of upper-level troughing bring cooler temperatures and early season heavy snow. The outlook across the interior West puts highs this week to average 10°-20° below normal for the Four Corners region. Highs are only in the 60s - 70s in Phoenix (normal is in low 80s) and 50s - 60s in Vegas (normal is in low 70s), while in Denver, heavy snow (!!) is expected on Wednesday and Thursday which means the highs will top out in the mid-30s (normal is in the mid-50s). Meanwhile, back in California, there stand decent chances that large portions of the Bay Area will be treated to a third-world life experience during prime voting hours today as PG&E invokes the Public Safety Power Shutoff (PSPS) protocols in response to a strong Diablo wind event. A moderate Santa Ana event is expected today in SoCal which makes for a difficult temp forecast for SoCal. While the source of the Santa Anas is cold air from the Great Basin, compressional warming that occurs from the downsloping that takes place as the path of the winds goes from the higher elevations to coastal locations could lead to warmer highs and raises the chance for a PSPS event in the south. Or the strength of the wind may fizzle out meaning that temperatures are just really pleasant while waiting in line at the polls.
  • Over the next three months, all eyes will be on the weather forecast and the demand numbers within the Golden State as the storage facilities cannot afford a slow withdrawal period. They need to move gas out of inventory or face a massively oversupplied first half of 2025 and repeat what the system looked like this past year, and this past weekend. The past weekend saw prices from the tri-day weekend package crash to under $1 per MMBtu at the SoCal Border, while city gate prices at PG&E and SoCal printed $1.87 and $1.28, respectively. The PG&E gas customer experience was filled with High Operational Flow Order (OFO) alerts across the weekend (several at the Stage 3 level, carries a $5 per dec penalty) and it looks as though potentially more are on tap as mild temperatures in California keep early heating season demand (right, the heating season, it started last Friday) at a low point. The West has a lot of natural gas swirling around and the high OFOs solidify that the balancing act needs to be watched closely. The gap between current cash gas under $2 versus December and January contract prices printing well over $5 incentivizes stockpiling molecules if one can find the shelf space. At the big picture level, it also gives producers an incentive to hold off on production today and sell contracts promising delivery later in the winter, potentially meaning a surge of production could arrive in the middle of the heating season.
  • According to the daily wind and solar curtailment reports from CAISO, curtailments exceeded 3,250,000 MWh. This means that in order to protect lines and transmission equipment from electricity production that had nowhere to go, the CAISO ordered the schedulers of the wind and solar to turn off at record levels. By comparison, curtailments for all of 2023 were 2,659,526 MWh and 2,449,248 MWh for 2022. There are two types of curtailments: system curtailments and local curtailments. System curtailments occur due to oversupply, resulting in over 2,981,000 MWh of curtailments this year. While the local curtailments are implemented to address congestion in specific areas, accounting for over 269,000 MWh of smaller localized events. California's installed energy storage capacity (ie, batteries) has surpassed 10 GW and in early October set a simultaneous charging record of 7,449 MW. 

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