Energy Market Update

October 2020

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.

Market Overview:

Natural Gas gross production has dropped to the lowest point since mid-2018, and is expected to continue dropping into early 2021.  This is bullish on prices, but is being offset by continued lower demand from the pandemic.  Natural gas storage level will begin the heating season above the 5 year average.  The Energy Information Agency (EIA.Gov) is forecasting that because of low production, prices will rise as winter heat demand draws storage down quickly.  As the world economy rebounds, demand for exports will follow, supporting higher prices through 2021.  The wholesale futures market chart shows this clearly, but also shows that investors feel confident that the abundance of natural gas will continue to be strong for the long term. 

The natural gas futures historic market average strip prices are below.

This next chart shows the 12month average wholesale electric pricing on PJM Western Hub.  This, like the gas chart, shows an upward movement over the past few weeks.

October’s gas index price settled on September 28th at $2.101/Dth, dropping 47.8¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending October 2nd shows an injection of 75 Billion Cubic Feet (Bcf), average for this time year.  This puts levels at 11.5% above the 5-year average by 394 Bcf, and 444 Bcf above last year at this time.  Current percentage of total capacity is at 87.6%. 

Energy news:  Winter Fuels Outlook

EIA forecasts that average household expenditures for all major home heating fuels, except heating oil, will increase this winter largely because of higher expected energy consumption. Average increases vary by fuel. Compared with last winter, EIA forecasts natural gas expenditures will increase by 6%, electricity by 7%, and propane by 14%. Home heating oil expenditures in EIA’s forecast fall by 10%, driven primarily by a combination of low crude oil prices and high distillate fuel oil supplies heading into the winter. EIA generally expects more space heating demand this winter compared with last winter based on forecasts from the National Oceanic and Atmospheric Administration (NOAA) that indicate colder winter temperatures. U.S. average heating degree days in this forecast are 5% higher than last winter. In addition, EIA expects that ongoing 2019 novel coronavirus disease (COVID-19) mitigation efforts and more people working and attending school at home will contribute to higher levels of home heating use this winter than in previous years (Winter Fuels Outlook).

Market Opportunity:

Short term pricing is currently up from prior months, however long term electric and gas contracts remain the best 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.

Note:  Our clients have the option of purchasing 100% of their electricity from alternative sources, such as wind and solar.  Speak to your Edge Insights representative for more information.

Benchmarking electric and gas consumption will let you quantify your energy efficiency efforts.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

September 2020

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.

Market Overview:

There has been a substantial jump in price during the past couple of weeks for the near trading months of natural gas, a result of reduced production from hurricane Laura and above average temperatures across the nation.  The latest forecast shows a cool down as we approach the fall shoulder season… traditionally a low demand time of year.  With above average storage levels, we should see a pullback in the market over the next few weeks.

The September Short Term Energy Outlook forecasts the natural gas production decline will continue until March 2021, averaging 3.3 Bcf/day lower than 2020.  This will contribute to higher spot market prices. The Energy Information Administration (EIA.gov) estimated the increase at $1 or more throughout 2021.  

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The natural gas futures market average strip prices are below.  The market continues to show 2022 to  2024 trading well below 2021.  

This next chart shows the 12month average wholesale electric pricing on PJM Western Hub.  This, like the gas chart, shows an upward movement over the past few weeks.

September’s  gas index price settled on August 27th at $2.579/Dth, up 72.5¢ from last month.

Natural Gas Storage Update: 

The chart below shows the forecasted deviation from the 5year average.  We can compare this to when we experienced high prices during late 2018 into early 2019.

The storage report for week ending Sept 4th shows an injection of 70 Billion Cubic Feet (Bcf), average for this time year.  This puts levels at 13.1% above the 5-year average by 409 Bcf, and 528 Bcf above last year at this time.  Current percentage of total capacity is at 80.6%. 

Energy news: Natural Gas Pipeline Costs

Columbia Gas Transmission (“TCO”) has filed a Section 4 rate case with FERC for the first time since 1995, and is expected to go into effect February 1st, 2021.  This requested increase is substantial and is being protested by multiple shippers claiming it is in direct violation of a 2016 FERC approved modernization settlement.  In addition to the modernization costs, they are seeking increases in rate schedules, and term and conditions.  We will not know the actual cost impacts until FERC releases the approved increases later this year.

Market Opportunity:

Long term electric and gas contracts are the best choice while out years continue to trade at favorable rates.  Here are the Pros and Cons of short and long-term contracts:

Short Term (Monthly or up to a 12 month term)

ProsCons
Monthly gas and electric prices may yield savings compared to a fixed rateIf market prices are higher during 2021, you may not have an opportunity to renew at a good rate.
Provides short term price protection 

Long Term (24, 36, 48 month terms)

ProsCons
Locking or fixing your costs for 24 months or longer will bridge 2021 when prices are expected to be higher.If the market drops during your term, you costs may be above the monthly variable rate.
Avoid potential short-term price surges generally during summer for electric, and winter for natural gas. 

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:  Our clients have the option of purchasing 100% of their electricity from alternative sources, such as wind and solar.  Speak to your Edge Insights representative for more information.

Benchmarking electric and gas consumption will let you quantify your energy efficiency efforts.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

August 2020

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.

Market Overview:

Natural gas nearest trading month has jumped up over 60¢ from the low in July due to forecasted above average cooling demand over the coming weeks. Longer term trends remain cautiously bullish as gas production is now about 4 Billion Cubic Feet per day less than this time last year.  This reduction is expected to continue until the market price recovers and profits can be realized.  At this time, supply and demand is in a neutral balance, as expected during summer.  The problem lies with the gas producer’s ability to ramp up output for next winter’s heat demand along with possible increases in LNG exports and piped gas to Mexico.  At some point, this production lag time will cause supply concerns, and add upward pressure on the market. 

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The natural gas futures market average strip prices are below.  The market continues to show 2022 and 2023 trading lower than 2021.  

This next chart shows the 12 month average wholesale electric pricing on PJM Western Hub.  This, like the gas chart, shows an upward movement over the past few weeks.

August’s  gas index price settled on July 29th at $1.854/Dth, up 35.9¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending July 31st shows an injection of 33 Billion Cubic Feet (Bcf), slightly below average for the past few weeks.  This puts levels at 15.1% above the 5-year average by 429 Bcf, and 601 Bcf above last year at this time.  Current percentage of total capacity is at 74.9%. 

Energy news:

The amount of gas produced in the Marcellus Shale area of PA, NY, OH, and WV has been on the increase since 2010.  Just recently have we seen a leveling off and slight decline.  New well technologies have allowed for an increased output per well.  Even with the producing well count dropping by more than half, we’re only seeing a slight decline in Marcellus Shale output. The overall decline is more pronounced when you combine all the U.S. drilling areas. (see below)

Market Opportunity:

Long term contracts are a good choice as the market continues to trade lower further out.

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. 

Benchmarking electric and gas consumption will let you quantify your energy efficiency efforts.  Talk to your Edge Insights account representative to learn how you can start a ‘Green Initiative’ program for your business.

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