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 ‘Polar Vortex’ is back in the news. We have had two episodes this January, with the latest breaking record low temps across a good portion of the northeast U.S. Demand concerns from utility companies forced them to request interruptible accounts switch to backup fuel, along with constrained usage for large volume LFD rate commercial and industrial consumers.
For now, storage levels are back in the 5 year average range, but is expected to drop below due to this cold spell in coming weeks. We feel that prices will move up over February while the market watches forecasts for March. March and April are critical months to determine how large a deficit we face going into the storage injection season.
The chart below shows the natural gas near month and future 12 month average strip prices. The future pricing from 2020 and beyond have been stable and continue to be good buying opportunities.
February’s market price settled on January 29th at $2.95/Dth, dropping $0.692 from last month.
Current Market Movers:
Short term temperatures to be above average for the southeast and up the coast to New England, which will help to normalize the storage drawdown from the January cold snap. However, this will be short lived. See the 7-11 day outlook on the right. The blue to purple indicates 6° to 12° below normal temperatures which consume the a good portion of lower 48 states in the 12-16 day outlook.
El Niño weather pattern probability now at 90% for Jan-Feb’19 will be returning to 50% by spring. This pattern generally causes a greater chance of above normal temperatures across the northern tier of the country, but has been overpowered by strong storm patterns pulling polar air masses out of Canada.
Bearish: (lower prices)
- Short term warm up for a good portion of the country
- Exports of natural gas are forecasted to decline over the coming months after a record high in January.
Bullish: (higher prices)
- Energy investors are eyeing the end of season storage levels. As it stands, the fundamentals are certainly favoring a bullish sentiment.
- January and February’s gas consumption is estimated to reach record levels.
- Very cold conditions have an adverse effect on gas drilling operations due to freezing fluids, and can shut down well sites.
Price Stabilizer: (controls price range)
- PJM is reporting use of coal for electric generation nearly equals natural gas during this high demand time of year.
Natural Gas Storage Update:
The storage report for week ending 1/25 shows an withdrawal of 173 Billion Cubic Feet (Bcf), near average for this time of year. This puts levels at 13% below the 5-year average by 328 Bcf, and 14 Bcf below last year at this time. Current percentage of total capacity is now at 50.2%.
Cold weather caused the shutdown of a generating unit at New Jersey’s Salem nuclear plant early Thursday after ice formed on the screens protecting its water intake, limiting the flow needed to cool the reactor. PJM had previously forecast that Thursday, Jan. 31, 2019 could be a record-setting day for power demand, but officials said that many large manufacturing plants and schools closed because of the weather, keeping demand below 140 GW, as opposed to a forecast of over 143 GW.
We rate mid to long term electric contracts as fair at this time.
Gas storage levels are stable but will remain on the low side of the 5 year average. Currently, the market is good and contracting gas for long term is also good.
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.