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Weekly Energy Industry Summary

Commodity Fundamentals

Week of December 9, 2024

By The Numbers:

  • NG '24 prompt-month NYMEX settled at $3.18/MMbtu, up $.11/MMbtu, on Monday, December 9. 
  • WTI '24 prompt-month crude oil settled at $68.37/bbl., up $1.17/bbl., on Monday, December 9.

Natural Gas Fundamentals - Neutral

  • Prompt-month NYMEX natural gas futures settled at $3.17 per MMbtu, up $.11 per MMbtu on Monday, December 9.
  • A cold start to December gives way to a warm up in the 11-15 day forecast keeping a strong check on near-term natural gas futures.
  • Natural gas production, month-to-date, averaged 103.8 Bcf per day, versus 104.6 Bcf per day for the same period last year.
  • Electric power generation demand for gas, month-to-date, averaged 35.8 Bcf per day versus 32.5 Bcf per day for the same period last year.
  • LNG exports month-to-date averaged 14.0 Bcf per day versus 14.6 Bcf per day for the same period last year.
  • Natural gas exports to Mexico, month-to-date , averaged 6.1 Bcf per day versus 5.6 Bcf per day for the same period last year.
  • Natural gas strip prices, 2025-2029 are; $3.20, $3.79, $3.79, $3.67, and $3.49 per MMbtu respectively.
  • Natural gas storage inventories are 3.94 trillion cubic feet; a level considered nearly "full" entering winter.

Crude Oil - Neutral

  • Syria's Assad Dynasty fell over the weekend causing some amount of turmoil in the global crude oil market.  
  • Developments in Syria can be generally viewed as a negative for the Iranian government and a potentially destabilizing event in Tehran.
  • Despite the chaotic situation in the Middle East, the oil market is currently well supplied.
  • Asian demand for crude oil continues to be weak as Saudi Arabia announced a cut of $.80 per barrel this week to Asian customers.
  • Chinese officials announced the most aggressive "stimulus" package in over a decade loosening monetary policy and taking on more debt.
  • The OPEC-plus alliance has postponed plans to unwind serval formal and voluntary crude production cuts amid a lukewarm outlook for global demand, CNBC reports.

Economy - Neutral

  • The Labor Department reports 227,000 jobs were added in November.
  • The unemployment rate rose to 4.2%.
  • U.S. Treasury yields rose slightlywith the ten-year trading at 4.228%, up three basis points.
  • The Fed is on course to cut rates in December, CNBC reports.
  • Trump plans to nominate Paul Atkins as SEC chair in a crypto-friendly move.
  • The Q4 CNBC Survey Monkey Small Business Survey reveals a surge in optimism covering issues from taxes to regulation, immigration and trade policy.

Weather - Neutral/Bearish

  • A short-lived cold front will move through the Midwest early this week.
  • The cold front will be followed by a warm up 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 5, 2024 are 3,937 Bcf; a withdrawal of 30 Bcf was reported for the week ending December 5, 2024.
  • Gas inventories are 284 Bcf greater than the five-year average and 185 Bcf greater than the same time last year. 
Values reflect week ending Dec. 6, 2024
Prices reflect week ending Dec. 6, 2024

Weekly Power Report:

Mid-Atlantic Electric Summary

  • The Mid-Atlantic Region’s forward power prices continue to be supported by weather and higher natural gas prices.  Latest predictions for more variability in the weather along with stronger intermittent cold shots is firming-up natural gas and power forward prices of late.  Reports of natural gas producers cutting capex spends for next year, with more of a focus on cash flow and less on production growth, is keeping those prices elevated as well.  A cold front moving across the eastern half of the nation is a little stronger and brings colder air in for the middle to end of this week. The forecasts turn milder next week and cancel out some of the heating demand gain of this week. The 11-15 day could still feature cold fronts across the eastern United States, but strong cold air and a lack of blocking means these would be weaker and transient.  Forward power pricing continues to be supported week-over week, particularly on the back-end of the price curve, with the calendar 2026-2029 terms 3% higher over the past week and 4% higher over the past month.  Final, day-ahead index prices in West Hub for November averaged $30.46/MWh, which is -14% lower than the October final settlement price average and -24% lower than last year’s November’s average.  Preliminary index average prices for December, thus far, are $45.34/MWh.
  • Additional FERC Filing by PJM to Remove Categorical Exemption for Intermittent Resources – During the 12/4 Market Implementation Committee PJM’s Adam Keech, Vice President Market Design & Economics, provided a verbal-only notice to the Committee of an additional FERC filing to change additional capacity market rules.  As previously reported, PJM already is planning to file on 12/9 a collection of capacity market changes related to the cost of new entry (CONE) and treatment of reliability must run resources.  The additional filing, scheduled for 12/20, will eliminate the categorical must-offer exemption for intermittent, storage, and hybrid resources, set a floor on the Market Seller Offer Cap at the Capacity Performance Quantifiable Risk, and allow segmented offers to better reflect increased risk at higher committed MW levels. Keech cited numerous letters to the PJM Board on the topic as a motivation for the additional changes.  The filing will propose implementation of these changes in the 2026/27 Base Residual Auction scheduled to be conducted in July 2025.  PJM subsequently issued a formal notice to members that will be discussed at a special Members Committee meeting on 12/13.

Great Lakes Electric Summary

  • The Great Lakes Region’s forward power prices continue to be supported by weather and higher natural gas prices.  Latest predictions for more variability in the weather along with stronger intermittent cold shots is firming-up natural gas and power forward prices of late.  Reports of natural gas producers cutting capex spends for next year, with more of a focus on cash flow and less on production growth, is keeping those prices elevated as well.  A cold front moving across the eastern half of the nation is a little stronger and brings colder air in for the middle to end of this week. The forecasts turn milder next week and cancel out some of the heating demand gain of this week. The 11-15 day could still feature cold fronts across the eastern United States, but strong cold air and a lack of blocking means these would be weaker and transient.  Forward power pricing continues to be supported week-over week, particularly on the back-end of the price curve, with the calendar 2026-2029 terms 3% higher over the past week and 4% higher over the past month.  Final, day-ahead index prices in ComEd for November averaged $22.64/MWh, which is -13% lower than the October final settlement price average and -8% lower than last year’s November average, while those prices in AdHub were $29.30/MWh and were -11% lower than October and -8% lower than the previous year.  Preliminary index average prices for December, thus far, are $28.68/MWh in COMED and $41.57/MWh in AdHub.  In Michigan the final day-ahead index prices for November averaged $27.42/MWh, which is -5% lower than the October final settlement price average and -15% lower than last year’s November’s average, while those prices in Ameren were $25.52/MWh and were -6% lower than October and -15% lower than the previous year.  Preliminary index average prices for December, thus far, are $36.38/MWh in Michigan and $34.91/MWh in Ameren.
  • Additional FERC Filing by PJM to Remove Categorical Exemption for Intermittent Resources – During the 12/4 Market Implementation Committee PJM’s Adam Keech, Vice President Market Design & Economics, provided a verbal-only notice to the Committee of an additional FERC filing to change additional capacity market rules.  As previously reported, PJM already is planning to file on 12/9 a collection of capacity market changes related to the cost of new entry (CONE) and treatment of reliability must run resources.  The additional filing, scheduled for 12/20, will eliminate the categorical must-offer exemption for intermittent, storage, and hybrid resources, set a floor on the Market Seller Offer Cap at the Capacity Performance Quantifiable Risk, and allow segmented offers to better reflect increased risk at higher committed MW levels. Keech cited numerous letters to the PJM Board on the topic as a motivation for the additional changes.  The filing will propose implementation of these changes in the 2026/27 Base Residual Auction scheduled to be conducted in July 2025.  PJM subsequently issued a formal notice to members that will be discussed at a special Members Committee meeting on 12/13.

Northeast Energy Summary

  • On December 5 the NEPOOL Participants Committee held their monthly meeting which was highlighted by FERC Commissioner Judy Chang listing her top priorities for the Commission as transmission planning and cost allocation, gas-electric coordination, co-located load and generation, and demand-side resource market participation. The month’s COO report included a several briefings including but not limited to: low natural gas prices and light loads kept average locational marginal prices (LMPs) low. As compared to October averages, November gas prices ($1.86 per MMBtu) were 2.7% higher and real-time hub LMPs increased by 10% ($38.48/MWh; day-ahead was $37.28/MWh). November 2024 saw among the lowest average hourly load values recorded for November (roughly 12,000 MW), with significant behind-the-meter (BTM) solar PV output despite relatively low solar irradiance this time of year.  Net Commitment-Period Compensation (uplift) was $2.27 million (thru 11/25), a $1.08 million increase from October and almost all ($2.24 million) for first contingency. It was noted that roughly 30% of the month’s NCPC related to an outage of a large generating unit in eastern New England on November 19-20.  The outage triggered the need to commit otherwise out-of-merit generation in eastern New England to protect against contingencies and lessen west-to-east flows across the East-West interface. ISO-NE also commented on the recent increase in New England exports to Hydro-Québec (HQ).  ISO-NE noted that its export limit to HQ over the Phase II tie is 1,200 MW and flows averaged roughly 900 MW for about 20 days in November.  ISO-NE noted its control room has no visibility into HQ reservoir levels but pointed to frequent communications with HQ and reliance on HQ’s regularly updated three-year outlook, which reflects increased demand in Québec and lower reservoir levels as a result of recent drought conditions.
  • New York Transmission Line Cancelled and New Renewables Announced - Recently, Clean Path NY and the New York State Energy Research and Development Authority (NYSERDA) announced the mutual termination of the project’s Tier 4 Renewable Energy Credit (REC) contract due to increased inflation and rising costs for key components.  Clean Path, touted by Governor Hochul as a signature part of her environmental record, would have helped clean up New York City’s grid and made it easier for building owners to meet the city’s stringent emissions standards.  The Clean Path Project was proposed as a 1,300 MW, 175-mile, underground transmission line set to begin commercial operation in 2027, delivering around 7.9 million MWh from upstate wind and solar facilities to New York City annually.  A portfolio of new renewables in upstate was also part of the project.  However, the cost of those projects also increased significantly since Hochul announced the deal in 2021, leading to financial questions about the transmission line.  The Clean Path project would have contributed nearly 5% of the state’s clean energy in 2030 and is currently negotiating the disposition of the $31 million security set forth in the contract. The other Tier 4 transmission line that won a NYSERDA contract, the Champlain Hudson Power Express, is under construction for expected completion in 2026.  It will carry Canadian hydropower to New York City. 

ERCOT Energy Summary

CAISO, Desert Southwest and Pacific Northwest Energy Summary

  • Steady as she goes for the Western U.S. as the latest model runs remain in pretty good agreement throughout the next couple of weeks with a general above normal lean for temperatures. We have to get through a few days of merely seasonable temperatures this week before the trends shifts back to a warmer than normal pattern towards the balance of next week. Although not that robust, we do have some storminess expected later this week and into this weekend across NorCal and the Pacific NW before the pattern looks to become more active next week. This includes significant snowfall forecast across mid to upper elevations stretching from the Sierras all the way up into the Cascades and British Columbia. Bottom line, near to above normal temperatures look to dominate the Western U.S. and Western Canada throughout the next couple of weeks while an otherwise active and stormy weather pattern into the West Coast and British Columbia. An unusually warm weekend followed by dry conditions and gusty Santa Ana winds is raising fire danger throughout the LA Basin this wek according to the National Weather Service (NWS). Red Flag warnings are up throughout SCE’s territory right now, as the warm temps combine with strong dry winds and low humidity raising the risk of wildfires which has caused Edison to issue preemptive warnings for potential public safety power shutoff (PSPS) events. Since January 1, 2024, CalFire reports 7,897 fires have burned 1,045,384 acres throughout the state.
  • Trading on Monday for flow today continued the pattern of recent weeks with SoCal city gate pricing settling near or even above PG&E city gate pricing. Flow for today is $3.36 at PG&E and $3.69 at SoCal’s gate. The alignment in daily index prices stems from increased demand in the LA Basin given cooler overnight temperatures, reduced wind generation of late and solar production volumes that suffer from a low sun angle and shorter days this time of year. Natural gas storage volumes are well stocked for the upcoming winter with PG&E showing 172 Bcf in the tank, roughly 21 Bcf over this time last year, and SoCalGas has 105 Bcf in its caverns which is in line with a year ago. The CAISO grid continues to display congestion between NP15 and SP15 daily index settles in the peak hour period. That spread today is nearly $13 per MWh as HE07-22 averaged $52.42 in the north and only $39.58 in the south. The DC transmission line which allows megawatts to move from the Pacific NW to the LA Basin returned to the service over the weekend which will make it easier to import hydro output for the late day ramp period. At least until temperatures drop and lift the demand levels up north, then the import volumes tend to fall towards zero which forces balancing authorities across the Southland to try and pull electrons from the Desert SW or ramp up their native thermal gens.
  • Resource Adequacy needs across the West are projected to jump based on the WECC’s 2024 Western Assessment of Resource Adequacy released last week. This report forecasts “staggering” growth in electricity demand across the Western Interconnect over the next decade — a trend that is even more concerning as entities struggle to complete resource additions on schedule. Annual demand is forecast to grow 20.4%, from 942 TWh in 2025, to 1,134 TWh in 2034. That growth rate is more than double the 9.6% growth forecast in resource plans filed in 2022, and over four times the historical growth rate of 4.5% between 2013 and 2022. A major driver for the increase in demand over the next 10 years is the proliferation of major demand sources like data centers, growth in manufacturing and crypto mining operations. Over the last six years, only 76% of planned resource additions came online in the year scheduled, and in 2023, that number was 53%. “Resource margins are shrinking, leaving less buffer for cancelled and delayed projects. If the resource build-out over the next 10 years mimics the last five years, by 2034, the West will have hundreds of hours each year when demand is at risk.” If demand grows as expected and industry experiences delays and cancellations in building new resources over the next decade, “the West will face potentially severe resource adequacy challenges.” Got site gen?

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