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Energy markets stand at a critical juncture as we approach Winter 2024-25. As Zane Curry, VP of Markets and Research at Mobius Risk Group, notes, we're at "the apex of what has been a tumultuous time for energy markets with quite a few of the individual components of what we'll call the broader energy complex moving in different directions."
The natural gas market presents an intriguing paradox.Despite higher absolute inventory levels, weather-adjusted analysis reveals an undersupplied market. As Curry explains, "Most producers need something$3.25 or greater to hold production flat, and when you consider that the producing region basis for most markets for the majority of the year is still in negative territory, we're arguably not achieving those levels."
In power markets, unprecedented load growth is being driven primarily by data centers and AI infrastructure. "ERCOT's latest long-term monthly peak demand forecast added 40 gigawatts to 2030 to bring us to 148gigawatts," notes Alex Melvin. In data center-heavy regions like Dominion's territory, they expect "263.8% growth in data center load" over 16 years.
The energy implications of AI development are substantial.As Melvin explains: "Nobody really can capture how AI and associated technological adoption is fitting into near-term load growth." He points to recent developments where "Microsoft [is] signing a long-term PPA to restart Three Mile Island unit, and Amazon with the cumulus data center campus and PA going for the nuclear from Susquehanna."
The efficiency challenge is stark. As Melvin notes, "Efficiency gains are only so helpful in this journey for data centers and AI, where the efficiency is going to be below that of the incentive for computational gains."
The surge in demand exposes critical infrastructure limitations. As Curry emphasizes, "inadequate storage capacity is the primary driver of what we see as the potential for a two-winter decision, inadequate storage capacity in all manners, natural gas, underground storage capacity, the fact that batteries are limited in scope."
Looking ahead, Curry predicts increasing regionalization:"We're arguably in a time where there really will be far less constraint than we've contemplated or dealt with in the past several years." However, he stresses that "we desperately need more gas storage, and we desperately need more capacity, more pipe capacity crossing the Texas-Louisiana border."
This evolving landscape suggests significant changes ahead for energy markets. As Curry concludes, "the hyper localization is going to continue... it's just what happens in a time of scarcity." The decisions made in the coming winters could shape the energy landscape for years to come.
The complexity of today's energy markets requires a sophisticated approach to risk management and market intelligence. As discussed in the webinar, market participants should focus on several key areas:
"The management, the knowledge, and the pairing of areal-time basis, the financial risk strategy with the physical procurement or sales strategy is crucial," emphasizes Curry. This includes monitoring all three components of pricing:
Learn more about Mobius Financial and Physical Risk Management
Mobius Risk Group offers several resources to help market participants navigate these complex markets:
Subscribe to Mobius Research and the Mobius Fundamentals and Strategy Report
Given the potential for significant market changes, organizations should:
Market participants can engage with Mobius Risk Group for:
As the energy landscape continues to evolve, staying ahead of market developments and maintaining a dynamic approach to risk management will be crucial for success in navigating the upcoming "two-winter decision" period and beyond.
Alex leads the Insights research arm of Mobius Risk Group. His primary role is to evaluate commodity risk from shifting structural supply and demand, geopolitics, and energy policy.
Background:
Research analyst: biotech, ags, energy
Varsity Football, SMU (3 yrs)
Varsity Football, University of Minnesota (2 yrs)
Education:
M.S., Engineering at The University of Minnesota
B.S., Biochemistry at Southern Methodist University
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