Energy Market Update-August 2017
Edge Insights energy experts are constantly monitoring energy market conditions in order to help ensure the best possible pricing and contract terms for our clients. The following report is a snap shot of current conditions intended to help our clients stay informed of market dynamics.
Natural Gas Market Overview:
The futures market has been trading generally around the $3 mark since June, but now with the cooler temperature forecasts for mid-August, prices have moved down. This may be a short term low as all the fundamentals are indicating a bullish attitude to surface this fall.
Natural Gas Storage Update:
The EIA has been forecasting the end of season, the first week of November, storage level of over 3.9 Trillion Cubic Feet (Tcf). Many analysts consider this an optimistic number and project closer to the 3.8 Tcf area. The storage report for week ending 7/28 shows the addition of 20 Billion Cubic Feet (Bcf). This is 3.0% above the 5-year average by 87 Bcf, but 279 Bcf below last year at this time. This injection puts storage levels at 68.8% of total capacity.
Current Market Movers:
Bearish: (lower prices)
- US gas production is 2% above last year’s levels.
- Demands for gas for electric generation are expected to ease compared to July
- Cooler temperature forecasts for a good part of the country will allow more gas to flow into storage over the next few weeks.
Bullish: (higher prices)
- Exports of Liquid and piped compressed natural gas continue to increase. This July’s export volumes report shows a 30% increase compared to last July.
- Tropical development and heavy rains can disrupt inland production and limit the amount of gas added to storage. Production in the Gulf of Mexico has declined over time, but is still subject to hurricane activity.
- Gas storage injections continue to be below average. There is a very good chance we will be below the 5-year average volume before winter. This may be a major influence on market direction later this year.
Gross Receipts Tax on Energy – Potential Changes / Additions
GRT in Pennsylvania is included with your electric bill for the electric generation supply at an effective rate of 6.21%. Not law yet, but recently the Senate passed Pennsylvania House bill 542, which will allow the GRT be added to natural gas costs, along with an increase of roughly 10% on electric generation supply.
Who is Mid-Atlantic Interstate Transmission?
Effective July 1st, Mid-Atlantic Interstate Transmission, LLC (MAIT) was approved by FERC to control the transmission assets formally under Penelec & Met-Ed. Under their transmission calculation methodology, any new incurred charges would be passed through to the consumer.
FirstEnergy launched ‘Energizing the Future’ in 2014, investing nearly $4.2 billion over the past four years on transmission upgrades primarily in its Ohio service territory. These projects resulted in transmission system reliability improvements that FirstEnergy will seek to replicate across its Pennsylvania territory. FirstEnergy will build these projects through its new transmission affiliate company, MAIT. (Excerpt from ‘First Energy Grid Modernization Program’ article on their website)
The market opportunity is a ranking of how we perceive timing of contract purchases or hedging natural gas or electric.
Information provided by the Energy Division of Edge Insights, Inc.