Energy Market Update-August 2018
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:
Because production is at record levels for natural gas, the market does not appear to react as much to the storage levels, which are now below the 5 year average range. Maybe the anticipation of an El Niño weather pattern, which will potentially keep winter temperatures above normal, is in play. Overall, there is still a bullish sentiment, as we watch for what remaining heat the summer has to offer.
July’s Market price settled on July 27th at $2.822/MMBtu, moving down 17.4¢ from last month.
The chart below shows the near and future years natural gas average 12 month pricing. The 12 month strip has remained below $3 since February, and the distant years though 2022, continue trending lower.
Current Market Movers:
Bearish: (lower prices)
- We’re past the midpoint of summer, and only a few weeks of potential energy demanding heat remains. El Niño weather is in the forecasts which allows for warmer winter conditions across the northern tier of the country.
Bullish: (higher prices)
- Natural gas storage levels are now below the 5 year average range. This past injection to storage was short, and the market moved up a few cents.
Price Stabilizer: (controls price range)
- Production of dry gas is about 11% above last year at this time, offset by increasing Liquid Natural Gas exports and piped gas to Mexico. Cooler temperatures during the remaining summer and into fall will allow for more to flow into storage.
Natural Gas Storage Update:
The storage report for week ending 7/27 shows an injection of 35 Billion Cubic Feet (Bcf). This puts levels at 19.7% below the 5-year average by 565 Bcf, and 688 Bcf below last year at this time. Current percentage of total capacity is now at 52.8%. Injections over the past 4 weeks are below average for this time of year.
Major utilities continue to increase spending on U.S. electric distribution systems
Source: U.S. Energy Information Administration, Federal Energy Regulatory Commission (FERC) Financial Reports
Spending on electricity distribution systems by major U.S. electric utilities—representing about 70% of total U.S. electric load—has risen 54% over the past two decades, from $31 billion to $51 billion annually. This increase has been largely driven by increases in capital investment. From 1996 to 2017, annual capital investment by these utilities for electric distribution systems nearly doubled, which was similar to increases in transmission investment over the same time period. Annual spending on customer expenses and operations and maintenance by these utilities also increased slightly. This information is based on reports to the Federal Energy Regulatory Commission (FERC) from major utilities.
See full article at EIA.GOVSource: U.S. Energy Information Administration, Federal Energy Regulatory Commission (FERC) Financial Reports, as accessed by Ventyx Velocity Suite
Special item for New Jersey customers:
Recent legislation was signed by NJ governor Phil Murphy, after passing both the House and Senate, by wide margins. The legislation will set aggressive future targets for NJ utilities to utilize renewable energy.
Legislative bill A-3723, raises the target of the state’s renewable portfolio standard (RPS) to 50% by 2030, and establishes a 2,000 MW by 2030 target for energy storage. Both of these items are much higher than previous targets.
These ambitious goals will be financed by an extra line item on utility bills, either home utility or electricity supplier and are expected to be in the range of 2 to 3 mils ($.002 to $.003) / kWh.
Short term electric and gas contracts continue rank fair. Long term is a good buy and should be considered if renewing contracts.
If entering into a new gas term, consider hedging out to 2021 for the best price.
The market opportunity is a ranking of how we perceive timing of contract purchases for natural gas or electric.
Information provided by the Energy Division of Edge Insights, Inc.