LMP Prices, Natural Gas, Freeport-Again
Energy Market Update Week 4, brought to you by Acumen.For More Updates Like This, Subscribe Here!
Goodbye winter, hello spring. Winter Storm Heather, and whatever the other guy's name was, it seems like we hardly knew ya. Looking at the LMP and natural gas prices, the previous price spikes appear to be nothing more than a blip on our winter calendar. Given the nature of daily LMP prices within the stack, we expect plenty of volatility during extreme weather, but even the calendar strip prices have had a nice snap back.
Speaking of natural gas, EIA reported a withdrawal of 326 Bcf from underground storage during the week ending January 19 which saw most of the central, east, and southeast in a deep freeze. This is the third time ever the number withdrawn has been in the 300s. Inventories now stand 4% above last year and 5% above the 5-year average. Those numbers stood at 12% and 11% respectively just one week ago.
As mentioned, natural gas has come crashing back down after a run up into the cold a few weeks ago. A warmer outlook has attributed to the pullback, but there was also some news from the White House that might have contributed. There was a rumor, and since confirmed, stating the Biden administration was considering a pause in greenlighting LNG terminal projects as climate "experts" are concerned they would create "carbon mega bombs". The market has seemed to shrug this off as nothing more than a political move into November. If this decision actually happened, it would not be relevant to any of the projects currently under construction which would mean this is probably a 2028 story.
Just as the market had digested the LNG moratorium, realizing this is more of an end of decade issue if at all, Freeport shakes the market this morning. It was announced that the Freeport LNG terminal (remember this was the terminal with the 2022 fire) will be limited or offline for a month. Apparently, Freeport burned out one its motors used to cool gas to a liquid form for transportation during Winter Storm Heather. The replacement timeline has been given as up to a month. The initial market reaction was a 5% sell off with a slight bounce back. As a reminder, any shut-in capacity in the US is a negative on prices as our market is oversupplied.
The Wall Street Journal commented in a story this week about the Red Sea snafu for global shipping, that it hasn't had an impact on LNG prices yet. Currently lower heating and electric demand in Asia, has been met with Russian pipeline and coal stockpiles. The temporary jump toward the end of fall 2023 in Europe and Asia on cold weather outlook, has not followed through and prices have fallen back toward year ago levels.
Every week we include the NOAA forecasted weather maps. This week we thought we'd add another NOAA map. Below is a map showing the deviation from normal temps as a result of the winter cold most of the US experienced a couple weeks ago. Just a friendly reminder....It's January, we have a whole month plus to go.
NOAA WEATHER FORECAST
DAY-AHEAD LMP PRICING & SELECT FUTURES
RTO ATC, PEAK, & OFF-PEAK CALENDAR STRIP
DAILY RTO LOAD PROFILES
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