A Look into the Bullish Northeast Gas and Power Markets | Energy Watch Blog

Published May 11, 2022 | Blog Post | energy-watch

Natural Gas and Power forwards are sky-high heading into the upcoming summer months and ESAI considers the power forwards significantly overvalued. Expectations of tight gas markets have driven up gas forwards and contributed to much stronger power forwards. However, the overly bullish power markets also seem to reflect significant risk premiums, most likely due to the reluctance of sellers to take on any forward price risk.

Power forward contracts for this summer are trading north of $100/MWh in PJM, New York, and New England. Implied forward spark spreads – an indicator of the profitability of gas-fired power plants – have exploded, greatly exceeding anything that has historically been realized in the power markets.

At current levels, Northeast power forwards cannot be fully reconciled with market fundamentals. ESAI has taken a much more bearish view on Northeast power prices this summer, based on ESAI’s power market research that is rooted in an in-depth understanding of key market fundamentals and detailed market analysis.

In addition to the assessment of Northeast gas and power forwards and ESAI’s fundamental gas and power outlooks, this month’s issue of ESAI’s Northeast Energy Watch also covers the market impacts of Pennsylvania potentially joining RGGI.…subscribers, be sure to check out the recent Energy Watch Monthly for more details and the latest forecasts!

For more information and specific price forecast data, check out ESAI Power’s Free Trial Service here: ESAI Power Free Trial.

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