Energy Market Update

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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