Natural gas prices slid overall last week, coming off substantially from the previous week’s rally. Correspondingly, power prices fell as well. ERCOT adjusted its peak summer load forecast down to account for economic impacts related to COVID-19. Telecommuting for PJM continues as Pennsylvania extends stay-at-home order. EIA reports that carbon dioxide emissions from the energy sector are expected to fall by a record 11% in 2020. PJM and the Southern United States should finally see summer like temperatures arrive in the later days of May.
The June 2020 NYMEX Henry Hub traded down to $1.616/MMBtu, a $0.33 (-16.9%) decrease from the previous Wednesday. The price of the 12-month strip averaging June 2020 through May 2021 futures contracts fell $0.20 (-7.8%) to $2.362/MMBtu.
For the week ending May 8th, 2020, the EIA reported net injection into storage of 103 Bcf, which is higher than last year’s net injection of 100 Bcf for this week and higher than the 5-year (2015–19) average net injection of 85 Bcf.
Working natural gas in storage totaled 2,422 Bcf, which is 799 Bcf (49%) higher than last year’s working gas totals of 1,623 Bcf at the same time and 413 Bcf (21%) higher than the 5-year (2015-2019) average of 2,009 Bcf. Total working gas is within the five-year historical range.
Headroom in the PPL – RSNH (Residential Electric Service) territory of PPL in Pennsylvania is now available in the shorter periods for contracts with 3 and 6 month terms. Headroom of $0.00412/kWh and $0.00169/kWh is likely for these periods, respectively.
On May 13th ERCOT released their final Seasonal Assessment of Resource Adequacy (SARA) report for the upcoming summer season (June 2020 – September 2020).This report projects the 2020 summer peak load forecast to be 75,200 MW, which is 1,496MW less than the prior report as a result of accounting for the electricity usage impacts related to COVID-19.This increases the reserve margin for summer 2020 to 12.6% versus the previous report of 10.6% reserve margin. The current summer peak load forecast of 75,200 MW would still be a record by edging out the 2019 record set at 74,820 MW. Under normal conditions ERCOT anticipates enough generation to meet load demand, however, if there is extreme weather, paired with low wind or unit outages, there may be the need to declare Energy Emergency Alerts (EEAs) this summer 2020. Let TrueLight help you stay on top of all utility and market rates and utilize our PTC tracking and headroom reporting or use our price verification service.
Power prices continued their march lower week over week after shaking off a few up days over the last few weeks. Prices will be hard pressed to fundamentally move higher in our current suppressed demand environment. Recent announced back to work plans will not have summer demand back at normal levels for this upcoming demand season so upside is limited.
Down in the Texas ERCOT market we did see good price movement with continued downward pressure on summer pricing and forward terms. The higher summer reserve margin update due to lower demand expectations from Covid-19 and additional generation coming on-line were the drivers of the big movements. Summer pricing was down another 5% week over week on the news and should have trouble breaking out and moving much higher in the coming weeks. Texas is one of the states starting to open back up but don’t see oil and gas production demand picking back up anytime soon so will help keep a lid on summer demand increases and pricing.
Market guidance hasn’t changed and continue to hedge in smaller volumes over time to avoid the rare up day and adjust to your demand forecasts. If you need to discuss current and future market outlooks, contact TrueLight to stay on top of value in current forward curve pricing with expert hedge strategy recommendations and learn more about our portfolio management execution expertise.
On May 13th, the EIA reported an expected 11% decline in energy-related carbon dioxide (CO2) emission in 2020. Petroleum is the largest source of CO2 emissions and has declined as result of restrictions put in place due to COVID-19. Travel restrictions and stay-at-home orders have reduced demand for fossil fuels. The coal power sector will also experience CO2 decline as the EIA stated, “The electric power sector accounted for more than 90 percent of the coal consumed in the United States in 2019, and EIA expects coal to continue to lose market share to natural gas and renewables in the power sector in 2020”. Carbon emissions from coal are expected to decline 23%. If carbon dioxide emissions in 2020 do indeed fall 11%, this will be a record decline, and will be the largest annual decline since 1949. Contact TrueLight Energy for renewable asset management services and project risk analysis.
As the governor of Pennsylvania extended the state's stay-at-home order to June 4th, PJM will still have a team of sequestered operators at one of its campuses, and to operate out of three control rooms. PJM’s facilities are in Montgomery County Pennsylvania and PJM is maintaining COVID related precautions including their telecommuting policies. PJM continues to see a reduction of 10% from the peak electricity consumption which can be attributed to COVID-19 impacts. For strategic energy market support and analysis of the most up-to-date energy market news or use our price verification service to ensure the most recent market shifts are reflected in your forward price assumptions.
Below normal temperatures are forecast for the Rockies in the 8-14 day window starting May 22th. The West Coast, Texas and Eastern Continental United States are expected to see above normal temperatures. Summer is forecast to arrive in the Southern states and PJM states, as above normal temperatures are most likely to be experienced there.