Energy Market Update-March 2017
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:
Temperatures for the U.S. were considerably above average for most of February. This reduced the draw from natural gas storage by 17% compared to last year, and expectations are for levels at the end of the heating season to be over 2 Tcf. February’s market price settled at $3.391/Dth, while March saw a decline and settled at $2.627/Dth. The chart below shows the 12-month average for the indicated terms.
Natural Gas Storage Update:
Natural Gas storage levels are above to the 5-year average by 14.3%, and 7.3% below last year at this time. A very unusual winter injection of 7 Bcf for week ending 2/24 was recorded as a result of warm conditions. Gas storage level is currently 2,363 Bcf, or 54.4% of capacity.
Current Market Movers:
- Moderate temperatures through February are forecasted to continue for March. (Clipping on right from Tropical Tidbits)
- Increases in production is expected to continue through 2017
- Demand increases for LNG and Mexico pipeline exports expected to continue.
- High usage of natural gas for electric generation, especially if we have a very warm summer. Injections of natural gas into storage will be the determining factor.
Tough Times for First Energy Corporation
On a February 22, 2017 earnings conference call, FirstEnergy Corp. said it may exit the competitive generation business by mid-2018, and shut down its nuclear plants in Ohio.
FirstEnergy reported an accounting loss of $6.2 billion. The company’s customer count for its competitive business shrank to 1.1 million in 2016.
As a first step to becoming a fully regulated utility, the company in January announced an agreement to sell units totaling a combined 1,572 MW for $925 million in an all-cash deal with LS Power. The deal includes 4 plants in Pennsylvania as well as a partial sale of its Bath hydro unit in Virginia.
In the earnings call, CEO Chuck Jones said that the company is also exploring the sale of its 545-MW gas-fired West Lorain plant in Ohio and the 88-MW gas-fired Buchanan facility in Ohio.
FirstEnergy Corp. is also exploring the possibility of engaging creditors to restructure debt at FirstEnergy Solutions (FES), a 1997-formed subsidiary serving residential, commercial, and industrial customers in Ohio, Pennsylvania, and New Jersey. Another subsidiary, FirstEnergy Nuclear Operating Co. (FENOC), which operates the company’s three nuclear plants, could also see similar measures taken. There is a possibility that FES and potentially FENOC may seek bankruptcy protection, although no such decision has been made, Jones said.
~Excerpts from Power Magazine article by Sonal Patel
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.