Energy Market Update

January 2021

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:

December Short Term Energy Outlook by the Energy Information Administration (EIA.Gov) posted this:

“In 2021, the forecast natural gas share (for electric generation) declines to 34% in response to a forecast increase in the price of natural gas delivered to electricity generators from an average of $2.44/MMBtu in 2020 to $3.38/MMBtu in 2021 (an increase of 39%). Coal’s forecast share of electricity generation falls from 24% in 2019 to 20% in 2020 and then returns to 24% in 2021. Electricity generation from renewable energy sources rises from 18% in 2019 to 20% in 2020 and to 21% in 2021.

The nuclear share of U.S. generation remains close to 20% through the forecast period.”

Natural gas along with electric prices peaked at the end of October, but have seen a substantial sell off and increased volatility since then.  The extended temperature forecasts are showing peak heating demand during late January, and again in late February. Natural gas storage levels are expected to fall below the 5 year average in concurrence with demand and with help from increasing LNG exports. U.S. natural gas production is lagging behind last year by 3.2 MMBtu’s per day, and may continue well into the latter half of the year.  Going forward, we are watching to see how domestic consumption will be affected as we begin to see results from the COVID-19 vaccine.

The natural gas NYMEX Futures historic to current market average strip prices are below.

This chart shows the 12 month average wholesale electric pricing on PJM Western Hub. 

January’s gas index price settled on December 28th at $2.467/Dth, dropping 42.9¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending January 1st shows a withdrawal of 130 Billion Cubic Feet (Bcf).  This puts levels at 6.4% above the 5-year average by 201 Bcf, and 138 Bcf above last year at this time.  Current percentage of total capacity is at 76.1% at 3,330 Bcf.  
(note: current level is showing as a small square on week one)

Energy news:  

U.S. renewable energy consumption surpasses coal for the first time in over 130 years

In 2019, U.S. annual energy consumption from renewable sources exceeded coal consumption for the first time since before 1885, according to the U.S. Energy Information Administration’s (EIA) Monthly Energy Review. This outcome mainly reflects the continued decline in the amount of coal used for electricity generation over the past decade as well as growth in renewable energy, mostly from wind and solar. Compared with 2018, coal consumption in the United States decreased nearly 15%, and total renewable energy consumption grew by 1%.  (Read full article on EIA.Gov)

Market Opportunity:

Short term pricing has recently dropped and the wholesale market is good, however long term electric and gas contracts have been the best choice for the past few months. 

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.

December 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:

As we approach winter months, temperature forecasts are the focus for energy investors.  Cool waters at the equator in the Pacific (El Niña) are blocking warmer ocean temperatures for a majority of the northern hemisphere.  This is expected to continue though winter.  La Niña conditions cause colder temperatures over Canada to dip into the central northern tier, with warmer temperatures to the south.  The potential for Polar Vortex air masses to reach the U.S. are higher due to fluctuations in the jet stream.  Extended cold periods, if they were to occur, could cause quick upward surges in the NYMEX market, affecting short term gas and electric prices.

Other factors affecting market are a continuation of lower production and increasing exports of LNG. Decisions by the new administration and plans for replacing fossil fuels over time will be watched closely. 

The natural gas NYMEX Futures historic to current market average strip prices are below.

This next chart shows the 12 month average wholesale electric pricing on PJM Western Hub. 

December’s gas index price settled on November 25th at $2.896/Dth, dropping 10¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending November 30th shows a withdrawal of 1 Billion Cubic Feet (Bcf), and about 50 Bcf above the 5 year average.  This puts levels at 7.9% above the 5-year average by 290 Bcf, and 343 Bcf above last year at this time.  Current percentage of total capacity is at 90.1%. 

Energy news:  The Future Use of Natural Gas for Electric Generation

Currently, 40% of electric generation is by use of natural gas.  Wind and Solar at 12% are quickly on the rise, and the main backup fuel coal, is now about 20%.  The chart below clearly shows how natural gas has increased over time, and because of the infrastructure put in place over time to allow this, it would be difficult to assume that renewable energy sources will replace it any time soon.  To become carbon neutral by 2050 would require replacing most if not all of the coal only burring plants, which is feasible.  The problem is that when natural gas prices are high, cheap coal is used at a much higher rate.  How this will affect electric prices in the future is yet to be seen.


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.

November 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 market prices have moved up over the past few weeks in anticipation of supply and demand fundamental changes.  Natural Gas storage levels are expected to drop below the 5 year average by end of December (chart on right). This is a quicker than normal drop due to reduced production, and is expected to remain low for the foreseeable future.  Low storage generally equates to higher prices.  It takes a continuation of higher prices for production to recover, and if this is recovery is slow, we could see elevated pricing going into winter of 2021/22.  

U.S. winter heating degree days are forecasted to be higher than last year, but normal when compared to the 10 year average.  November is starting off slightly below average.

Coal use for electric generation will increase though 2021 as a result of higher gas costs and will help to offset some of the demand for natural gas. To the contrary, U.S. natural gas prices are a bargain worldwide, so LNG exports will be increasing.  

The COVID-19 pandemic will continue to add volatility and unpredictability to the market.  

The natural gas futures historic to current 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. (2023 & 2024 now added)

November’s gas index price settled on October 28th at $2.996/Dth, increasing by 89.5¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending October 30th shows an the first season’s withdrawal of 36 Billion Cubic Feet (Bcf), larger than average for this time year.  This puts levels at 5.4% above the 5-year average by 201 Bcf, and 200 Bcf above last year at this time.  Current percentage of total capacity is at 89.6%. 

Energy news:  

Presidential Election Effects on Energy Market

We have discussed with suppliers, and reviewed reports from industry experts, and agree that the outcome of the election will have little or no impact on energy pricing in the near term.  Technical data of supply and demand will continue to be the big influencer, outside of the occasional weather impacts. 

Over the past couple of years, there was an over production in the oil industry and its associated gas. This played a part in the domestic collapse of pricing earlier this year as the warmer 2020-21 winter temperatures and the COVID pandemic occurred.  These low prices bankrupted many natural gas producers and had huge financial impacts on the oil and gas giants.  It will take time to return to a more stable energy balance, so market volatility will continue for now.   

Market Opportunity:

Little change since last month’s report.  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.

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.  

—————————————————————————————————————————————————-

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.

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