U.S. energy futures prices for the winter of 2024-2025 are showing significant declines from the previous year, largely due to high levels of natural gas inventories. The United States is heading into winter with its largest natural gas reserves since 2016, according to the U.S. Energy Information Administration (EIA).
Shayne Willette, senior analyst at S&P Global Commodity Insights, said: “With prices at historic lows in 2024, producers have reduced production to try to stabilize prices. Meanwhile, electricity generators have benefited greatly from this weakness, recording record gas consumption. »
Data from S&P Global reveals that futures prices for January and February in Western regions, such as SP15 (California), are down 32% and 37%, respectively, from US levels. last year. A similar trend is observed at the ERCOT North (Texas) hub, where January and February prices are 27% and 31% lower.
Eastern regions defy the trend
Conversely, the PJM West (East) hub shows a slight increase in futures prices for January (+5%) and February (+1%) compared to 2024. This divergence is explained by expectations around the December auction for capacity prices, following record levels recorded during the July auction.
The weather outlook also contributes to these regional dynamics. The National Weather Service's Climate Prediction Center forecasts above-normal temperatures in the south and northeast of the country. On the other hand, below normal temperatures are expected in the Pacific Northwest and the Northern Midwest, which could influence energy consumption levels.
Natural gas stocks: a key factor
The United States ended the gas injection season with a volume of 3,922 billion cubic feet (Bcf), 6% above the five-year average, despite below-average injections this year. However, the final weeks of the injection season, which ended Oct. 31, saw additions above the five-year average, according to the EIA.
The EIA projects that total natural gas withdrawals during the 2024-2025 heating season will reach 1,957 Bcf. If the winter is harsh, this consumption could lead to a tightening of stocks, which would push the prices of natural gas, and by extension those of electricity, upwards.
Willette concludes: “The speed and intensity of stock depletion will be highly dependent on winter weather conditions. »
