The upcoming winter’s natural gas and power prices outlook for PJM, NYISO and ISO-New England continue to trend up despite the warmer-than-normal weather forecast. The forwards appear overvalued and ESAI Power holds its bearish stance on natural gas and power prices. The markets bullish outlook is based on a recent uptick in delivered gas and global LNG prices, but ESAI Power’s outlook has key insights driving a stable gas and power forecast.
Across the Northeast power futures are higher than ESAI Power’s forecast for a few key reasons in PJM, New England and NYISO:
- PJM Update – A rally in natural gas elevates the power prices forwards and spark spreads. ESAI believes these prices and spreads are overvalued, and that winter coal generation dispatch will leave its mark on spark spreads.
- ISO-NE Update – Robust global LNG prices are expected to impact import levels and drive a reliance on other fuels. Forwards indicate scarcity pricing is possible in cold weather events, however ESAI is not confident in this.
- NYISO Update – The bullish natural gas outlook is also lifting power prices in the market. Lingering effects from a large nuclear retirement in the Hudson Valley will lead to increased dependency on high-priced natural gas and drive some volatility in certain zones.
The inflated price outlook is largely influenced by global supply and demand trends and the potential for cold weather events. Currently, global LNG trends are impacting the value of domestic LNG exports and delivered natural gas prices, however ESAI does not expect this trend to continue this winter. This month’s Energy Watch covers two new capacity locations and some key regional LNG markets that are driving the bullish outlook. Subscribers, be sure to check out the report for more detailed analysis and our latest power price forecasts!
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