US Power Market Update - 8 Mar. 2022

Market Commentary

The natural gas storage report for the week ending 2/25 indicated a withdrawal of 139 Bcf. This draw was in line with expectations, but exceeded last year's number, as well as the benchmark for the 5-year average for the week.

Power market futures came back with a vengeance this week, with the Russia/Ukraine war clearly influencing the domestic markets. While the forthcoming summer strip saw relatively minor increases, Winter '22-'23 spiked significantly, running up most sharply in the Northeast, where natural gas makes up a heavier portion of the overall power generation stack. Volatility was seen in the outer years as well, with both NY and New England rising roughly 10% in 2023 and 2025, and jumping 13% higher than last week for 2024.

While the U.S. energy market volatility certainly pales in comparison to the crisis in Europe, the waters remain very choppy for end-users with near-term unhedged positions. Organizations unable to withstand the premium of a short-term contract may find themselves looking farther out to capitalize on backwardation. Moderate spring weather will be essential to providing much-needed pricing relief.

Regional LMP Movement

There was a wide variety of LMP movement this week, largely dependent on the area of the country. While California and PJM saw spot rates back down 6% and 7% respectively, NYISO rose 16%, while New England spiked 37% vs. the prior week. ERCOT increased 4%.

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