Energy Market Update

August 2019

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.

Overview:

Now that we’re past the peak summer, the frequency of prolonged heat lessens. Natural gas storage will start to build substantially in the coming weeks.  NOAA released their winter temperature forecasts which show near normal for Oct through Dec, with Jan and Feb slightly warmer.  Of course, trusting forecasts is never a good idea.  Historically, we have learned that any extended low price market will cause a supply / demand swing of the pendulum.  It’s not if, but when and how much.

August’s gas market price settled on July 29th at $2.141/Dth, down 15¢ from last month.

The above chart shows the wholesale 12 month average strip price of electric on PJM’s Western Hub.  Clearly a good time to lock in rates.

The chart below is natural gas.  We are now seeing a pullback in future years as investors look for near month gains.  This downward movement does not appear to be affecting electric, which indicates a possible market bottom has formed.  We are soon heading into the fall which will reduce demand for cooling that supports a continued bearish sentiment for the coming weeks.

Current Market Movers:


Bullish:  

  • El Niño conditions have dissipated, allowing a potential warm up in the short term. This could add some unexpected demand for natural gas for electric generation.

Bearish: 

  • LNG exports have declined in August reports, but are expected to increase substantially later in the year.
  • End of season gas storage outlook shows a substantial recovery from last year, and injections are continuing to be above average.
  • Currently we are not seeing hurricane activity, and the forecast is for 75% fewer tropical storm or hurricane formations than average.

Natural Gas Storage Update: 

The storage report for week ending Aug 9th shows an injection of 49 Billion Cubic Feet (Bcf).  This puts levels at 3.9% below the 5-year average by 111 Bcf, and now 357 Bcf above last year at this time.  Current percentage of total capacity is now at 62.6%. 

Energy news:

Recent pipeline price increases in the northeast could affect your costs from the utility, or supplier if on a contract.  This may show on your bill as Texas Eastern Rate Case adjustment.  The Texas Eastern rate increase will be passed through to full service customers starting in June 2019.  The charges we are seeing initially are about 15¢ to 35¢ per dekatherm.  Charges can vary depending on what utility or supplier you’re with. 

Market Opportunity:


The market buying opportunity is excellent.  Gas and electric markets both continue to trade low.    

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.

Note:  Reducing your kW demand is good for the planet and good for your bottom line.  Just knowing how much you consume and what your equipment uses, is an important first step.  For example; reducing your kW load on peak demand days will not only help the electric generators, but can save money on you electric bills.

Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

July 2019

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.

Overview:

Natural gas and electric futures markets declined through June, allowing bargain hunters to take advantage.  Above normal temperatures have not consumed a majority of the country at any one point, so demand for electric generation has been subdued.  LNG exports also declined over the past weeks, so gas storage levels are rebounding quickly from last winter lows. 

July’s market price settled on June 26th at $2.291/Dth, down 34.2¢ from last month.

Current Market Movers:

Bullish:  

  • Short term warm up across the country will add demand for electric generation, which natural gas is now the largest percentage of fossil fuel used for this purpose. 

Bearish: 

  • Natural gas exports are not seeing an increase in the coming weeks.  Exports are expected to increase substantially later in the year.
  • El Niño will influence the Jetstream, albeit weakening towards late summer, but will help to reduce extreme and extended periods of high temperatures.  Increased rainfall and moist soil conditions are also a factor for cooler summer conditions.
  • End of season gas storage outlook is good and recovery is strong at this time.

Neutral Impacts:

  • Demand may be reduced by rain and cloudy conditions in the south from tropical storms or hurricanes.  This is off-set by a reduced production as wells are shut down in the Gulf and on land by flooding.  A disturbance (Tropical Storm Barry) is currently in the Gulf.

Natural Gas Storage Update: 

The storage report for week ending July 5th shows an injection of 81 Billion Cubic Feet (Bcf).  This puts levels at 5.4% below the 5-year average by 142 Bcf, and now 275 Bcf above last year at this time.  Current percentage of total capacity is now at 56.5%.  The past 15 injections were above the 5 year average.

Energy news:

Fossil fuels—petroleum, natural gas, and coal—have accounted for at least 80% of energy consumption in the United States for well over a century. Overall energy consumption in the United States reached a record high in 2018 at 101 quadrillion British thermal units (Btu), of which more than 81 quadrillion Btu were from fossil fuels. Despite the increase, the fossil fuel share of total U.S. energy consumption in 2018 increased only slightly from 2017 and was the second-lowest share since 1902.

The increase in fossil fuel consumption in 2018 was driven by increases in petroleum and natural gas consumption. Coal consumption fell by 4.3% in 2018, the fifth consecutive annual decline. U.S. consumption of coal peaked in 2005 and has declined nearly 42% since then. U.S. coal consumption fell to 687 million short tons in 2018, the lowest level of coal consumption in the United States since the 1970s.

Natural gas consumption increased in 2018, reaching a new record consumption level of 82.1 billion cubic feet per day. Natural gas consumption has increased in 8 of the past 10 years. Growth in natural gas consumption has largely been driven by increased consumption in the electric power sector. Overall, U.S. consumption of natural gas has increased by 37% since 2005.
Read full article at EIA.gov

Market Opportunity:


The market buying opportunity is good.  Gas and electric market prices are lower than usual at this time.  The fundamentals mentioned above also show that long term contracts are also a good choice.

Note:  Reducing your kW demand is good for the planet and good for your bottom line.  Just knowing how much you consume and what your equipment uses, is an important first step.  For example; reducing your kW load on peak demand days will not only help the electric generators, but can save money on you electric bills.

Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

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.

June 2019

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.

Overview:

As we transition into the cooling season, markets are down due to a cool start to summer.  Natural gas storage is rebounding from well below average, LNG exports are consistent, and production remains high.  New LNG demands will be coming online later this year, which will slow gas storage replenishments, but the anticipated end of season storage levels are good.  The outlook for temperatures over the next 4 weeks is average for almost the entire continental U.S.  No major price movers are in play.

June’s market price settled on May 29th at $2.633/Dth, up only 6.7¢ from last month.

Current Market Movers:

Bullish:  

  • LNG exports continue to rise with new liquefaction processes opening later this year.  Gulf Coast LNG is trading below $3/Dth, down 35.8% from last month.  Asia markets are strong, while the increase tariffs to 25% will deter flow to China.
  • Mexico tariff for piped natural gas may be a factor in the coming weeks.

Bearish: 

  • The total supply / demand balance will remain bearish with no heat in the near term forecasts. 
  • A weak El Niño will continue to influence the Jetstream and help keep summer temperatures down.
  • End of season gas storage outlook is good and recovery is strong at this time.

Natural Gas Storage Update: 

The storage report for week ending May 31st shows an injection of 119 Billion Cubic Feet (Bcf).  This puts levels at 10.8% below the 5-year average by 240 Bcf, and now 182 Bcf above last year at this time.  Current percentage of total capacity is now at 45.4%.  The past four injections were above average.

Energy news:

Pennsylvania’s power generation mix changes with
 natural gas production growth

On May 8, Exelon announced that the company would shut down its Three Mile Island Unit 1 nuclear facility in central Pennsylvania by September 30, 2019. In February 2019, the Three Mile Island facility provided 980 megawatts (MW), or 1.9%, of Pennsylvania’s capacity. In addition to Three Mile Island Unit 1, EIA’s electric generator inventory data indicate that two coal plants with a combined nameplate capacity of 1,845 MW have retired so far in 2019 in Pennsylvania. As retirements of coal and nuclear plants continue, natural gas-fired generation will continue to have a leading role in Pennsylvania’s electric generation mix.

Natural gas-fired electric generation in Pennsylvania has increased steadily in the past decade. EIA electricity generation data indicate that despite the fall in net electricity generation in Pennsylvania, which has declined steadily by an average of 0.7% per year from 2010-18, natural gas-fired generation has increased both in share and in absolute terms.

In 2010, Pennsylvania generated 230 billion kilowatt hours (kWh) of electricity. Almost half of this generation came from coal-fired facilities, followed by 34% from nuclear, 15% from natural gas and 3% from other sources such as petroleum, hydroelectric, wind, solar, biomass, and wood. In 2018, of the 215 billion kWh of electricity generated in Pennsylvania, 39% came from nuclear, 36% from natural gas, and 21% from coal, and 5% from other sources.

From 2010-2018, nuclear fired electric generation grew by 7% and provided an annual average of 36% of the generation mix annually on average. With the shutdown of the Three Mile Island facility, the remaining four nuclear facilities will account for 21% of Pennsylvania’s nameplate capacity.

Between 2010 and 2018, natural gas-fired electric generation rose by 128%, while coal-fired electric generation fell by 60%. Though electricity generation from other sources have increased, these other sources still account for a small share—about 3%–5% of Pennsylvania’s total generation mix.

The increase in natural gas-fired electric generation capacity in Pennsylvania has come with significant growth in the state’s natural gas production. Pennsylvania’s marketed natural gas production reached a new high of 18.6 billion cubic feet per day (Bcf/d) in February, a 2440% increase from February 2010, and a growth of 13% from a year ago. A decade ago, Pennsylvania marketed gas production accounted for just 1% of the total U.S. marketed natural gas production. Currently, Pennsylvania accounts for 19% of U.S marketed natural gas production.

Although 2,825 MW of coal-fired and nuclear generation capacity will be retired in 2019, Pennsylvania is adding new natural gas-fired generation capacity. From 2019–2022, in Pennsylvania, 17 new natural gas-fired plants will be in various stages of development, bringing 8,460 MW of capacity online by 2022.

Market Opportunity:


The market buying opportunity is excellent.  Gas and electric market prices are lower than usual at this time.  The fundamentals mentioned above also show that long term contracts are a good choice.

Note:  Reducing your kW demand is good for the planet and good for your bottom line.  Just knowing how much you consume and what your equipment uses, is an important first step.  For example; reducing your kW load on peak demand days will not only help the electric generators, but can save money on you electric bills.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

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.

May 2019

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.

Overview:

As we approach summer, investors are keeping an eye out for above normal temperature forecasts.  The current El Niño influence may help avoid this scenario for the central U.S. at least for a few months. 

Natural gas production remains high which will allow for larger injections into gas storage.  Storage levels are currently well below average, but are now projected to be at or near the 5 year average range by fall.

Retail market sentiment is bullish as low gas prices promote more long term contracts.  As this continues, we expect to see prices move up, but being kept in check by the storage fundamentals.

Natural gas is and will continue to be the largest portion of the fuel used to generate electric.  (Pie Chart)

The chart below shows the natural gas near month and future 12 month average strip prices.  We show this chart because of the close relationship to electric prices. 

Also note how the future pricing for 2020 is now showing more influence from near trading months.  If you need to lock in gas or electric for this period, moving early may work to your advantage.

May’s market price settled on April 26th at $2.566/Dth, dropping $0.147 from last month.

Current Market Movers:


Bullish:  

  • Retail sentiment in Natural Gas trading is elevated because of the low gas prices.  This indicates that more long term contracts are being hedged, which drives up the NYMEX futures market prices.
  • LNG exports continue to rise.  Currently Gulf Coast LNG is trading about $4.50/Dth.  This is a 35% decline over the past year, but now showing signs of recovery.
  • Natural Gas Basis costs in the northeast have increased over the past year.  This is a result of higher demand for natural gas being used for electric generation and LNG exports. 

Bearish: 

  • The total supply / demand balance will remain bearish with spring’s low demand. 
  • A weak El Niño influence may keep early summer temperatures down.
  • End of season gas storage outlook is good.

Neutral:  

  • Rig count reports are now showing a cut back in well count from a high of 202 in January to the current 186.  This is normal this time of year.

Natural Gas Storage Update: 

The storage report for week ending April 19th shows an injection of 92 Billion Cubic Feet (Bcf).  This puts levels at 21.6% below the 5-year average by 369 Bcf, and now only 55 Bcf below last year at this time.  Current percentage of total capacity is now at 30.6%.  The past four injections were above average.

Energy Info: Energy Efficiency & Conservation

Act 129 of 2008 provides Pennsylvania businesses, governments and non-profits opportunities to take energy efficiency and conservation to the next level. The General Assembly enacted Act 129 to require Pennsylvania’s seven largest electric distribution companies (EDCs) to develop energy efficiency and conservation (EE&C) plans and adopt other methods of reducing the amount of electricity consumed by customers. Pennsylvania’s EDCs that are subject to Act 129 include Duquesne Light Company, Metropolitan Edison Company, PECO Energy Company, Pennsylvania Electric Company, Pennsylvania Power Company, PPL Electric Utilities Corporation, and West Penn Power Company.

The General Assembly charged the Pennsylvania Public Utility Commission (PUC) with implementing Act 129 and guiding businesses, governments, non-profits and electric utilities toward achieving the legislation’s overall goals of reducing energy consumption and peak electric demand.
~Pennsylvania Public Utilities Commission

Reducing your kW demand is good for the planet and good for your bottom line.  Just knowing how much you consume and what equipment uses, is an important first step.  For example; reducing your kW load on peak demand days will not only help the electric generators, but can save money on you electric bills.  Talk to your Edge Insights account representative to learn how you can start a ‘Green’ initiative program for you business.

Market Opportunity:


The market buying opportunity is good.  Gas and electric market prices are low during this time of year.  The fundamentals mentioned above also show that long term contracts are a good choice.

 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.

April 2019

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.

Overview:

Average temperatures across the U.S. were higher over the past few weeks, which allowed for an early start to replenishing natural gas stocks.  Projected summer temperatures are forecasted to be average for July and August and slightly below for June and September.  If this proves true, natural gas and electric rates may remain stable.  The current cold and snowy conditions in central U.S. will not have much impact as temperatures will recover quickly this time of year. 

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.

April’s market price settled on March 27th at $2.713/Dth, dropping $0.142 from last month.

Current Market Movers:

Bullish:  

  • LNG exports continue to rise.  Currently Gulf Coast LNG is trading below $4.25/Dth.  This is nearly a 35% decline over the past year and bargain for importers worldwide.
  • Basis costs in the northeast have increased over the past year.  This is a result of higher demand for natural gas being used for electric generation and LNG exports.  

Bearish: 

  • We’re entering into the low demand time of year.  Energy investors are watching the fundamentals, such as well counts, exports, production, storage injections, and temperature forecasts. The total supply / demand balance is bearish for the next few weeks.
  • A weak El Niño influence will remain though mid-summer which may keep early summer temperatures down, and a reduced electric demand for cooling.  

Neutral:  

  • Oil prices remain above $60/barrel, production of natural gas, as a byproduct, will be sufficient to replenish storage to adequate levels.  Rig count report released on April 5th shows an increase of 15 new wells brought into production bringing the U.S. oil rig count to 831.

Natural Gas Storage Update: 

The storage report for week ending April 5th shows an injection of 25 Billion Cubic Feet (Bcf), 2nd of the year.  This puts levels at 29.6% below the 5-year average by 485 Bcf, and 183 Bcf below last year at this time.  Current percentage of total capacity is now at 26.4%. 

Energy Info:

Annual U.S. crude oil production reached a record level of 10.96 million barrels per day (b/d) in 2018, 1.6 million b/d (17%) higher than 2017 levels. In December 2018, monthly U.S. crude oil production reached 11.96 million b/d, the highest monthly level of crude oil production in U.S. history. U.S. crude oil production has increased significantly over the past 10 years, driven mainly by production from tight rock formations using horizontal drilling and hydraulic fracturing. EIA projects that U.S. crude oil production will continue to grow in 2019 and 2020, averaging 12.3 million b/d and 13.0 million b/d, respectively.  See chart below and read the Full article at the EIA.Gov.

Market Opportunity:


The market buying opportunity is basically the same as last month.  We rate mid to long term electric contracts as fair at this time. 

Gas storage levels continue are on the low side of the 5 year average, but are expected to recover though 2019.  Currently, the market is good and contracting gas for 2 or 3 year terms is a good strategy.

 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.

March 2019

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.

Overview:

We follow the fundamentals that affect electric and natural gas markets, i.e. weather, production, storage, forecasted supply & demand, gas to coal switching for electric generation, and nuclear outages.  Each month we share current market information based on these fundamentals, if they are relevant to and causing market movement.

So far this winter, we have had two major dips in the Jetstream that brought abnormally cold weather to a large part of the country.  According to NOAA weather forecasts, we are going to see another event early in March.  The end of season gas storage level projections have been reduced, however cold in March generally has a lesser impact on the market.  We begin injecting gas into storage, possibly by the next report at the end of March or early April.

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.

March’s market price settled on February 26th at $2.855/Dth, dropping $0.95 from last month.

Current Market Movers:

Bullish:

  • Coal to Gas switching for electric generation is higher because of low gas prices. This may affect the storage injections during warmer months.

  • Low gas prices will reduce well drilling contracts in dry gas producing areas. Even though production is up 1% over the previous week, we are seeing a slowdown overall in the growth rate.
  • Per the EIA.GOV; Ethane production will have an effect on natural gas demand by about 1% or 740 MMcf/d (million cubic feet). As Ethane demand rises, more is extracted from the natural gas, slightly reducing the heat value.  The areas mostly affected are in the Gulf oil producing regions of New Mexico, Oklahoma, Kansas and Missouri.
  • LNG exports continue to rise. Currently LNG is trading at about $5.  This is nearly a 35% decline over the past year and bargain for importers worldwide.

Bearish:

  • A weak El Niño influence will remain in place which may keep early summer temperatures down, and a reduced demand for cooling.

Neutral and ‘to watch’:

  • If oil prices remain above $60/barrel, production of natural gas, as a byproduct, will be sufficient to replenish storage to adequate levels. If oil declines in price, along with production, this would have upward impact on natural gas prices.

Natural Gas Storage Update:

The storage report for week ending 2/22 shows an withdrawal of 166 Billion Cubic Feet (Bcf), in the expected range for this time of year.  This puts levels at 21.6% below the 5-year average by 424 Bcf, and 154 Bcf below last year at this time.  Current percentage of total capacity is now at 35.2%.

Energy Info:

Nuclear outages occur because of refueling and routine maintenance, and is generally done every 18 to 24 months.  Scheduling is at low demand times of the year and can take on average about 35 days.  When the outages coincide with a temperature anomaly or natural disaster, use of other energy sources must increase. The above chart gives shows the 5 year range compared to the last and current year.

Market Opportunity:

The market opportunity is basically the same as last month. We rate mid to long term electric contracts as fair at this time. Gas storage levels are on the low side of the 5 year average. Currently, the market is good and contracting gas for 2 or 3 year terms is a good buy.

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.


February 2019

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%. 

Energy News:

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.

Source: https://www.utilitydive.com/

Market Opportunity:

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.


January 2019

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:

December’s market price was the highest since the ‘Polar Vortex’ winter of 2014 at $4.715/Dth.  Concerns for gas storage levels along with a very cold November were to blame.  Since then, a more normal temperature range has been forecasted and the market dropped back.

The chart below shows the natural gas near month and future 12 month average strip prices.  The future pricing from Mid-2019 and beyond have been stable and continue to be good buying opportunities.

January’s market price settled on December 27th at $3.642/Dth, dropping $1.073 from last month.

Current Market Movers:

Bearish:  (lower prices)

  • Analyst’s expectations for the end of winter storage levels have been increased and may be back in the 5 year average range in coming weeks.
  • Forecasts for January show an equal chance of normal temperatures across the south and into the northeast. Above normal for a good portion the northwest
  • El Niño weather pattern probability increased 10% from last month, now over 90% for Jan-Feb’19. This pattern causes 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)

  • We are seeing neutral conditions at this time, however extreme cold conditions, if they were to occur, can adversely affect well production and spike natural gas and electric prices.
  • Nuclear power plant outages are about 66% above the 5 year average. To compensate for this, an increase in fossil fuel consumption is expected.
  • Now that natural gas prices have pulled back, the gas-to-coal switching with the electric generators has declined, thus increasing gas demand.

Price Stabilizer: (controls price range)

  • As of November 2018 there are 798 drilled, but uncompleted wells in gas producing regions. If there is a need to ramp up production, they can bring these online quickly.

Natural Gas Storage Update:

The storage report for week ending 12/28 shows an withdrawal of 20 Billion Cubic Feet (Bcf), well below the average -100 Bcf for this time of year.  This puts levels at 17.2% below the 5-year average by 560 Bcf, and 450 Bcf below last year at this time.  Current percentage of total capacity is now at 61.9%.  Average withdrawals for the past month were mixed with the past two being well below average.

Energy News:

[Read the full short-term energy outlook at https://www.eia.gov/outlooks/steo/]

EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 32% in 2017 to 35% in 2018 and in 2019. EIA forecasts that the electricity generation share from coal will average 28% in 2018 and 26% in 2019, down from 30% in 2017. The nuclear share of generation was 20% in 2017 and EIA forecasts that it will average about 19% in 2018 and in 2019. Wind, solar, and other non-hydropower renewables provided about 10% of electricity generation in 2017. EIA expects them to provide 10% in 2018 and 11% in 2019. The generation share of hydropower was 7% in 2017, and EIA forecasts that it will be about the same in 2018 and in 2019.

EIA expects average U.S. solar generation will rise from 212,000 megawatt hours per day (MWh/d) in 2017 to 268,000 MWh/d in 2018 (an increase of 27%) and to 303,000 MWh/d in 2019 (an increase of 13%). In recent years, the industry has seen a shift from fixed-tilt solar PV systems to tracking systems.. Although tracking systems are more expensive than fixed-tilt systems, revenue from the additional electricity generated by following the path of the sun across the sky often exceeds the increased cost.

Market Opportunity:

Mid to long term electric and gas contracts continue to be good at this time.  Gas storage levels are improving but will remain on the low side of average. This may keep the closer futures trading months priced higher.  To avoid this potential, locking in gas or electric deals that renew later in 2019 is suggested.

 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.

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