Energy Market Update-December 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:
In September the near trading month was at ~$2.70, moved up to the $3.50 area in October, now trading about $4.50 after hitting a high of $4.80/Dth, setting December’s index rate at $4.715/Dth. This is the largest upward movement since last January, when it hit the $3.50 area. This jump was based on colder November temperatures and low storage levels as we go into winter.
The chart below shows the natural gas near and future 12 month strip prices. The future pricing from Mid-2019 and beyond have been stable and continue to be good buying opportunities.November’s market price settled on November 28th at $4.715/Dth, moving up $1.53 (67%) from last month.
Current Market Movers:
Bearish: (lower prices)
- Forecasts for warmer than average conditions for the latter half of December will slow withdrawals of stored gas.
- El Niño weather pattern probability is now 80 – 85% for the upcoming winter, a 10% increase from last month. If this pattern remains as forecasted, there is a greater chance of above normal temperatures across the northern tier of the country, keeping cooler and wetter conditions to the south.
Bullish: (higher prices)
- Natural gas storage levels continue to be well below the 5 year average range.
Price Stabilizer: (controls price range)
- Nuclear power plant outages are declining. Currently about 8100 MW of generating capacity is off-line, however this is still 30% more last year at this time.
- Current high gas prices have caused an increase use of coal for electric generation, in turn reducing demand for gas.
Natural Gas Storage Update:
The storage report for week ending 11/30 shows an withdrawal of 63 Billion Cubic Feet (Bcf). This puts levels at 19.5% below the 5-year average by 725 Bcf, and 704 Bcf below last year at this time. Current percentage of total capacity is now at 68.4%. Average withdrawals over the past month were slightly above average.
Met-Ed has updated their default service program for commercial customers using between 100-400kW for the past 12 months, who are not already shopping with a competitive supplier. After June 1st, 2019, you would be placed on an hourly wholesale price for power. You would no longer be protected by the tariff rates that are published and changed only a few times a year, instead exposed to price fluctuation caused by many factors, i.e.. weather, time of day, season, and supply market disruptions.
Mid to long term electric and gas contracts are good at this time. If gas storage levels do not return to the 5 year average range by spring, prices will more than likely be higher. To avoid this possibility, it is better to lock in gas or electric deals sooner than later.
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.