Energy Market Update

July 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:

The current summer temperature forecast is for above normal cooling demand, so consumption of natural gas for electric generation is also projected higher.  The high summer demand along with natural gas production declines will cause smaller than average additions to storage over the coming weeks.  Low natural gas prices have also reduced the use of coal for electric generation, adding to the developing bullish market sentiment.

To the contrary, we are seeing a reduced demand for LNG exports as the world continue to struggle with the COVID-19 pandemic.  Currently, natural gas storage levels are above average for this time of year, which is holding market prices down at this time.  The uncertainty of how states can reopen, or potentially close again, is forcing many energy investors to watch from the sidelines.

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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, however 2021’s average price (green) shows how market participants agree with higher price forecasts released last month from the EIA.gov.

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

 April’s gas index price settled on June 26th at $1.495/Dth, down 29.9¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending June 26th shows an injection of 65 Billion Cubic Feet (Bcf), average for this time of year.  This puts levels at 17.8% above the 5-year average by 466 Bcf, and 712 Bcf above last year at this time.  Current percentage of total capacity is at 70.4%. 

Energy news:

Shale gas pioneer Chesapeake Energy Corp., filed for bankruptcy protection, the Wall Street Journal reported. Chesapeake is among the largest producers of natural gas and is expected to trim operations and production pursuant to its financial restructuring. Accounting firm Deloitte expects that the U.S. shale industry is about to enter a period of “great compression” as low oil prices take a toll on the sector, CNBC reported. The firm believes that exploration and production companies could write down the value of their assets by $300 billion with major impairments expected in the second quarter of this year, CNBC said. Deloitte said that 30% of shale operators are technically insolvent and expects numerous bankruptcies in the coming months and a mass consolidation in the industry in the coming months and years. The financial distress and coming restructuring of the U.S. oil and gas industry is likely to play a pivotal role in the amount of oil and gas produced and the need for higher prices for oil and gas going forward to justify current rates of output. The financial distress in the oil and gas industry is part of what we have noted as the potential “structural decline” of production that may present itself in the second half of this year and through 2021.

~This article was released on Constellation Energy’s weekly update on 6/30/20

Market Opportunity:

We continue to have a good buying opportunity for both gas and electric.   Long term contracts are a better choice as uncertainty continues with expectation for higher natural gas prices through 2021.

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.

June 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:

A data point that’s important to watch now is the total supply / demand balance.  Generally, in summer, this is positive which means the excess natural gas is able to flow into storage at an increased rate in preparation for next winter.  In March, the balance was positive by 5.33 bcf/d (Billion Feet per day), in April, after the collapse of oil prices and production shut-ins, this dropped to negative 6.74 bcf/d, a swing of 12.07 bcf/d.  This balance is expected to remain negative through summer into fall.  The Energy  Information Association (EIA.Gov) is forecasting market prices to rise later this year and remain higher throughout 2021. 

In the United States, the producing natural gas only well count in June 2019 was 186, as of May 29th, 2020, only 77.  This drop along with oil well closures equates to an 8% total dry gas production decline from last November.  Low market prices have producers working in the red, with some filing for bankruptcy.  The problem is, if market prices move up to a point where it makes sense to add new wells and increase production, the time needed to ramp back up will cause a lag in supply.  When this happens, we usually see a substantial spike in prices during the heating season. 

The full effects on energy demand as business slowly starting to reopen will become more apparent as we move into summer.  Many industries continued to operate during the COVID-19 crisis, so the largest impact will be from commercial and retail air conditioning load.  Because natural gas is predominately used for generating electric, we expect to see reduced storage injections starting later in June.

The natural gas futures market average strip prices (below) saw a run up during the cooler April, but since has leveled out.  The market is in backwardation with 2022 and 2023 trading lower than 2021.

This next chart shows the 12 month average wholesale electric pricing on PJM Western Hub.  The correlation of natural gas to electric prices is clearly demonstrated here.

 April’s gas index price settled on April  28th at $1.794/Dth, up 15.1¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending May 1st shows an injection of 102 Billion Cubic Feet (Bcf), average for this time of year.  This puts levels at 18.4% above the 5-year average by 422 Bcf, and 762 Bcf above last year at this time.  Current percentage of total capacity is at 62.1%. 

Energy news:

Lower crude oil prices will mean less exploration and development

According to the financial reports analyzed by the U.S. Energy Information Administration (EIA), global expenditures related to oil and natural gas exploration and development (E&D) increased $42 billion (13%) for 102 publicly traded oil companies in 2019, totaling $361 billion. As a result of significant crude oil price declines in 2020, however, global proved reserves will likely be revised downward, and E&D expenditures will also likely decline. Several companies have already announced large budget reductions. More ›


Market Opportunity:

The market is exhibiting a good buying opportunity for both gas and electric.   Long term contracts are a good decision at this time, as expectation for higher natural gas prices will make for higher electric rates.

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.

May 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:

A slow moving pocket of below average temperatures encompassed the eastern half of the U.S. over the past couple of weeks. This has added spring heating demand and pushed electric and gas prices up slightly.  Average temperatures are expected to resume by mid-May.  Natural gas storage projections made in Mid-April of over 4,000 Bcf (Billion Cubic Feet) by this coming winter have now been reassessed down to about 3,800 Bcf. 

Reduced consumption due to the COVID-19 pandemic will provide price stability for now, but as states begin to reopen, this may change.  We will be watching for the potential of weak natural gas storage builds as we move into the cooling season.  Because gas is the predominate fuel to generate electricity, the impact on electric market prices will be much more pronounced during an extended heat wave.

The natural gas futures market average strip prices (below) show the near years are more sensitive to current conditions.  This also shows us that market participants expect natural gas to remain a bargain in ’22 & ’23.

This next chart shows the 12 month average wholesale electric pricing on PJM Western Hub.  The correlation of natural gas to electric prices is clearly demonstrated here.

 April’s gas index price settled on April  28th at $1.794/Dth, up 15.1¢ from last month.

Natural Gas Storage Update: 

The storage report for week ending April 1st shows a injection of 109 Billion Cubic Feet (Bcf), above average for this time of year.  This puts levels at 20.5% above the 5-year average by 395 Bcf, and 796 Bcf above last year at this time.  Current percentage of total capacity is at 53%. 

Energy news:

Daily electricity demand in New York falls about 13% after COVID-19 mitigation efforts

Recent business shutdowns and changes to normal routines related to mitigation efforts for the 2019 novel coronavirus disease (COVID-19) have caused daily, weekday electricity demand in New York state to decrease by 11%–14% in March and April compared with expected demand, after accounting for seasonal temperature changes. Electricity demand changes in New York state and in New York City, in particular, have been more pronounced than in other parts of the country, which may partly be caused by regional differences in how much electricity each end-use sector consumes and the varying effects of COVID-19 mitigation efforts on the sectors.


Click this link for the Full article on the EIA.gov website

Market Opportunity:

The market is continuing to be a very good buying opportunity for both gas and electric is excellent.   The EIA is projecting that energy prices will increase later in the year and remain higher in ‘21, so taking action early is suggested.  Hedging out 24 to 36 month is a good decision at this time.

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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