Energy Market Update: What to Know For 2016 Budget Planning

Jonathan Lee

Wholesale electric and natural gas prices have been hovering around a three-year low for much of the summer. Just a year and a half ago, dramatic volatility in the electric and natural gas markets wreaked havoc on energy budgets. What changed during that timeframe and what can be expected for the year to come? I address those questions in this recently presented, “Q3 Energy Market Outlook: What to Know for 2016 Budget Planning” webinar. Here are a few of the key takeaways from the presentation:

1.Natural gas and wholesale electricity are near their lowest levels since 2012. Natural gas production has been growing at a record pace, which has caused supply to outpace demand for the fuel. Supply and demand will eventually rebalance, but key demand growth is still about a year away.

2. Gas-fired electric generation is soaring. This past April, natural gas briefly surpassed coal for the first time as the nation’s largest generation source. A wave of coal plant retirements will continue the shift to natural gas as a generation source in the years to come.

3. El Niño has a greater than 90 percent chance to strengthen into winter. El Niño typically brings warmer/drier conditions to the major gas consuming North during winter, which could reduce pipeline constraint-related volatility in New York and New England.

4. 2016 budget influencers.

  • Downside Pressure: Gas production, healthy natural gas storage, weak winter demand, pipeline capacity additions.
  • Upside Potential: Gas-fired generation growth, LNG exports, EPA regulations, unexpected weather, reliability enhancements.
  • Natural Gas Price Forecast: Wholesale natural gas prices are expected to slowly rise into 2016. At this point, upside risk is more likely than strong downside moves.

For more information I invite you to watch the webinar recording. Our new Energy Price Hub is also a great resource to help you stay informed and get the latest updates on energy prices and market intelligence.

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