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January 12, 2022
Natural gas is seeing strength this morning as overnight weather runs turned colder at the tail end of the 11-15 day portion of the forecast, although only days 14 and 15 are colder than the 10- year average. Cold risk remains mostly in the West at this time. Yesterday was a volatile day for natural gas, with prices dropping in the morning on news of further Freeport delays, but then rallying back on colder midday weather runs. The EIA reported a rare January injection of 11 Bcf for the week ending 1/6/2023 but despite the winter injection prices remained elevated, currently sitting at $3.86/MMBtu for February (a $0.20 increase from yesterday’s settle). Analysts at Tudor, Pickering, Holt & Co said that following the benign weather start to 2023, they’re modeling 1.85 Tcf for end of season storage which is an increase of 200 Bcf to their prior forecast.
3 year view of the calendar strip price
Phillips Appointed Acting FERC Chair:
Federal Energy Regulatory Commission (“FERC”) chairman Richard Glick’s term as a commissioner expired at the end of 2022. Commissioner Willie Phillips was appointed as acting chairman of FERC on January 3, 2022 until the Biden administration can secure Senate confirmation of a fifth commissioner and a permanent chairperson. Until that time, FERC will have 2 democratic commissioners and 2 republican commissioners, increasing the chances for ideological impasses on policy matters. Phillips has significant energy experience, including 8 years as a commissioner of the District of Columbia Public Service Commission.
EIA Issues Short Term Forecast:
On January 10, 2023, the Energy Information Administration (“EIA”) issued its short-term energy outlook. EIA is forecasting record high natural gas production in 2023 and 2024. Specifically, EIA is forecasting 109 BCf/d of gas production in 2023 and 111 BCf/d in 2024. As a comparison, production for October 2022 was 101 BCf/d. With increased production combined with relatively flat LNG exports, EIA expects 2023 and 2024 henry prices to remain below $5/mmBtu.
Avangrid asks DPU to Terminate Offshore Wind PPA:
On December 16, 2022, wind developer Avangrid asked the Massachusetts Department of Public Utilities (“DPU”) to terminate the Commonwealth Wind power purchase agreements and order the Massachusetts utilities to re-bid for the associated capacity in Massachusett’s upcoming offshore wind solicitation. In its petition, Avangrid, who owns 100% of the 1200MW Commonwealth project, said that it couldn’t finance the project due to higher costs stemming from higher interest rates and material costs. In November, the DPU rejected requests from Avangrid and Mayflower Wind to renegotiate their previously signed offshore wind contracts. Northeast U.S. states have signed long term contracts for more than 17,000MW of offshore wind projects, all of which will likely experience higher costs for interest and materials than previously planned.
Freeport LNG Status:
On December 12, 2022, the Federal Energy Regulatory Commission (“FERC”) sent a lengthy list of information requests to Freeport LNG regarding its restart plans. The information requests follow a visit to the facility by FERC, the U.S. Coast Guard and Pipeline Hazardous Materials Safety Administration (“PHMSA”). The information requested included the status of personnel training, safety and emergency plans, and proposed remedial actions. FERC’s letter to Freeport stated that approval to restart will only be granted following the review of filed responses. Freeport had recently indicated that it expected to restart by the end of December, but that looks unlikely. Freeport’s 2 BCf/d export project has been out of service since June 8, when an explosion occurred at the facility. Freeport’s delay in restarting has kept significant volumes of natural gas from being exported from the U.S.