The first official day of summer is Friday, June 21. That means packing up your winter clothes unless you live in Northern California where May’s record-setting snowfall will keep ski resorts open into August! As the snowpacks melt (or don’t), the weather warms, and El Niño lingers for a second year in a row, Drillinginfo’s expert analysts have begun developing their hydro, wind, and natural gas production and demand forecasts.
Rob Allerman, Senior Director of Power Analytics and Rob McBride, Senior Director of Market Intelligence, recently co-hosted a webinar to deliver Drillinginfo’s predictions for the West Coast Hydro outlook, how the long-term load and wind forecast can help provide deeper insights to traders and analysts, and explore the U.S. natural gas balance.
The replay of the webinar – “Summer 2019 Gas and Power Fundamentals” – is available here. Let’s take a look at some highlights.
Rob Allerman began with his hydro-generation forecast for the Columbia Basin, which is expected to be below average due primarily to the fact that the remaining snowpack is far below average for this time of year. Most of the snow melted early, particularly in the northern basins, and that will have a significant impact on hydro generation in July and August.
The forecast for California hydro generation is a 180 degree turn. It’s been a very wet year, especially in Northern California, and a cool spring has slowed the pace of snowpack melt. After years of suffering through droughts, the area will generate extremely high hydro flows and reservoir storage levels will be high throughout the summer.
North American Wind and Load Summer Forecast
For the second straight year the country will be affected by El Niño conditions – a rarity. Before this year, you could count on one hand the number of times it had occurred: 1957-1958, 1968-1969, 1976-1977, 1986-1987, and 2014-2015.
History shows the second El Niño year usually brings a summer with cool temperatures across the Great Plains and Midwest, but warmer temperatures on the coasts. We expect that will be the case this summer, and will be one of the factors in below average load and lower than average wind generation over the middle of the country.
After Allerman concluded his presentation with the PRT/Drillinginfo ISO Load and ISO Wind forecasts, it was Rob McBride’s turn to deliver our U.S. gas balance forecasts.
Natural Gas Demand
We’re moving out of the cooler winter and early spring months, and that signals the coming shift of natural gas demand away from the residential heating load to gas burning by electricity generators.
Following the 2014 oil price crash, both production and demand for natural gas has grown steadily each year. Production is being driven by the shale boom and improving drilling economics and efficiencies, and demand is being driven by low-cost gas and the retirement of several coal and nuclear power plants.
Production in 2019 has started off strong, even compared to the incredible year that was 2018. As you can see below, that gap is starting to narrow.
O&G producing companies want to live within their cash flows, and that means lowering their capital expenditure budgets. We expect to see production growth through the summer as companies introduce new efficiencies and get better at drilling – just not the same explosion of growth as last year.
McBride also provided an outlook for net exports of natural gas and what will be left over in the U.S., and explained the myriad of factors that could affect power demand and the end of summer storage inventory.
Follow this link to view the webcast replay. If you want to do a deeper dive, you’ll find all the details in our latest FundamentalEdge Market Outlook report, available as part of our Drillinginfo MarketView Fundamentals product suite.