Energy Market Update
Edge Insights energy experts are constantly monitoring energy market conditions in order to help ensure best possible pricing and contract terms for our clients. The following report is a snap shot of current conditions that is intended to help our clients stay informed of market dynamics.
Natural Gas Market Overview:
The gas market price moved up quickly in December as a result of a mid-month cold spell, which set the January index price at $3.93/Dth. Based on a January forecast for above average temperatures, the February’s price has dropped to the $3.25/Dth area. Note the volatility in the 12-month average strip price in the chart below.Natural Gas Storage Update:
Natural Gas storage levels declined 49 Bcf for a total of 3,311 Bcf for week ending 12/30/16. This puts us just under the 5-year average. We are currently at 76.2% of capacity, which is 364 Bcf below last year. The chart below shows the withdrawals / injections over time. Note that while storage volumes are always compared to historical values, the average daily consumption of gas has been steadily increasing.Current Market Movers:
- Gas storage levels may remain strong on new forecasts for a warming trend from mid-January which may take us through the rest of the heating season.
- Increase in the well count for oil / gas after severe cutbacks during 2016. Now even with the count from last year at this time.
- Expectations for higher demand this summer would keep injections into storage low. End of season levels at or below the 5-year average will keep pricing in the current trading range. Most of 2017 gas futures market already have this priced in. The chart below shows that clearly.
The electric market in PJM has barely moved in the past 200 days but 2017 has opened with prices moving down, very likely because weather forecasts are more favorable than expected.
Effective Jan 1, 2017, NJ sales & use tax has dropped to 6.875% from the previous 7%, and will drop again to 6.625% on 1/1/18. Because New Jersey, by law, requires electric suppliers to include the tax in their pricing, all NJ customers already under a supply contract will see a reduction in existing prices.
UGI Utility announced, starting this year, new rebate programs for gas residential and commercial customers for eligible account numbers starting in 2, 3, 5, or 7. Installation of high efficiency boilers, water heaters, warm air space heaters, and various commercial kitchen equipment. Visit their website at www.ugi.com/save-energy-money for the full details.
With longer terms for both gas and electric to include 2018 and 2019, buying opportunities look good at this time.
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.