Energy Market Update

June 2022

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 prices are high for 3 main reasons; inventory is below the 5-year average, LNG exports are strong, and demand for natural gas for electric generation remains strong as we slowly transition away from coal.  The high prices have spurred well drilling, but government regulations have restricted development of new pipeline capacity to move the gas to market.  Developers are worried that any major investment in this area will be faced with similar issues, so they are reluctant to pursue new contracts.  Basically, we’re seeing natural gas production increasing but teetering on maximum capacity.  With demand increasing worldwide, it’s hard to foresee a balance of supply and demand any time soon.

Our LNG Exports are also at a peak as energy hungry European countries struggle with the loss of Russian oil and natural gas.  The only way to balance the industry is for demand to drop significantly… a recession perhaps?  The delayed but increasing push to develop more solar and wind will help, but has a way to go to offset the high use of fossil fuels for electric generation.  Now with higher cost for just about everything, producing wind and solar domestically will be expensive too.

An explosion at the Freeport, TX LNG plant on 6/8 has forced a closure that could last until later in the year.  This plant is capable of exporting about 15% or the total U.S. LNG output.  We will watch how this affects the market and storage levels in coming weeks.  Natural gas will likely be diverted to storage, and this news caused a drop of market prices.

This chart shows the natural gas NYMEX Futures historic to current market average strip prices.

Electric Market 12-month average prices for current and future years shown in the chart below.

The June natural gas trading month price was determined on May 26th, and settled at $8.908/Dth, up $1.641/Dth from the prior month. (See historic chart below)

Natural Gas Storage Update: 

The storage report for week ending June 3rd shows an injection into storage of 97 Billion Cubic Feet (Bcf).  This puts levels below the 5-year average by 14.5%, and 16.6% below last year at this time.  Current percentage of total capacity is at 46.5% at 1,999 Bcf.

The chart below shows the current natural gas storage levels going back 24 months.

Market Opportunity:   
Long term contracts are getting a fair rating.  Starting in April of 2023, the NYMEX Futures prices are well below July ’22 through Mar ’23.  Energy contracts extending into 2024 and beyond are the best choice.  The low prices we experienced the past few years are a result of the shale gas boom.  We don’t expect to see prices that low in the future. 

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 2022

Market Overview:

We continue to see extremely high prices for crude oil and natural gas. One result of this is much higher electric rates.  Electric prices track very closely to natural gas as you can see on the charts below.

This chart shows the natural gas NYMEX Futures historic to current market average strip prices.

Electric Market 12-month average prices for current and future years shown in the chart below.

As you can see on the charts, energy prices started to rise steadily in the summer of 2021 and then shot up when Russia invaded Ukraine.

The most important issue impacting global energy prices going forward will be how the U.S. and the world can meet the energy needs of Europe replacing Russian energy.  The U.S. and other countries do have the capacity to increase production.  However, beyond the challenges of increasing production are the logistical challenges of getting the energy to Europe. 

Can Production Increase in the Lower 48 States?

The sustained high oil and natural gas prices would lead to increased production during normal times.  Well, times are far from normal.  The energy industry faces issues from pandemic related labor shortages, to supply chain problems, to governmental policy obstacles.   

Here is an excerpt of a recent article from the Wall Street Journal in this regard:

Several factors are holding back production, including publicly listed producers’ decision to return more cash to investors and limit spending on growth as well as the rapid depletion of some of the best shale wells. Now, supply-chain snarls mean that shale companies that want to grow production will be hard-pressed to do so.

The bottlenecks have forced some shale producers to pause operations for days, weeks or even months while they wait for steel casing, for which there is currently far less inventory than usual in the Permian, or to replace workers, many of whom haven’t returned to the industry since the pandemic. In some cases, entire crews have left projects before completion in search of bigger paychecks, executives said.

“If somebody walked in and put a pile of money on the table and said, ‘Drill me a well next week,’ it isn’t going to happen,” said Jamie Small, president of private-equity-backed oil producer Element Petroleum III. “You just can’t get the stuff to do it.”

What about the Ukraine Crisis and growing need for natural gas in Europe?

As far as helping with supply of natural gas for the European Union (EU), it’s a bit more complicated.  We have a limited capacity of LNG to export to Europe, but are diverting as much as possible to help replace what Russia has previously provided. 

The EU is doing all it can to increase its imports, and a variety of other countries may help, such as the UK & Turkey, but also Qatar, Egypt, Algeria, and Libya, with Qatar being the most favorable due to the shorter shipping distance. Qatar currently provides 24% of EU LNG imports. For LNG imports to increase, new infrastructure must be built, and adjustments would be needed to existing long-term contracts (LTC) between Qatar and Asian countries.  We should not forget that the ‘Low-Carbon Initiative’ in Europe will factor into this over the coming years.

The May natural gas trading month price was determined on April 27th, and settled at $7.267/Dth, up $1.931/Dth from the prior month. (See historic chart below)

Natural Gas Storage Update: 

The storage report for week ending April 22nd shows an injection into storage of 40 Billion Cubic Feet (Bcf).  This puts levels below the 5-year average by 17%, and 21.4% below last year at this time.  Current percentage of total capacity is at 34% at 1,490 Bcf.

The chart below shows the current natural gas storage levels going back 24 months.

Energy News:
Three producing regions drove U.S. natural gas production in 2021

In 2021, U.S. natural gas production increased 2% and reached 118.8 billion cubic feet per day (Bcf/d) on a monthly basis in December 2021, the highest on record. Three regions drove this growth: Appalachia, Permian, and Haynesville, which collectively accounted for 59% of gross withdrawals in 2021 compared with 24% in 2011.

Read the full article at EIA.ORG

Market Opportunity:   
Because of the high-priced market affecting years farther out, long term contracts are still the best choice.  A price ceiling may have formed for now as the war in Ukraine continues. A restructuring of energy product movement around the globe is occurring during the lower heat demand time of year in the northern hemisphere.  We are hoping to see the ‘Market Opportunity’ to move back to fair over the coming weeks.

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 renewable 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.


April 2022

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:

Currently, market prices are elevated. Not because we have a supply issue domestically, but because of geopolitical events.  The profound effects of the war in Ukraine, and natural gas shortages from winter of 2020/21 in Europe, are the main factors for the inflated electric and natural gas prices here at home.  More countries are adding sanctions to stop delivery of Russia’s oil and gas. Pressure from the new administration’s policies to transition away from fossil fuels has added to supply fears.  Regulation, cancelled pipeline projects, and restrictions on drilling dissuades new entrants into this competitive business.  Removal of imported oil from Russia has little impact on our crude oil storage levels as some of this is processed for export.  All these factors are clearly in the minds of energy investors. 

Executives from major LNG companies met with European energy officials to discuss the potential of increasing supplies to replace Russian provided gas.  It will take time to build up capacity here in the U.S., but they see the opportunity to meet the demand by the middle of the decade.  It’s uncertain how much natural gas will be diverted away from U.S. storage through this summer, so we’re going to be watching this closely.

Forecast is for continued high prices. Tensions between U.S. and Russia will likely continue after the war as Russia is expected to continue to use oil and gas as a political tool. 

The April natural gas trading month price was determined on March 29th, and settled at $5.336, up $0.768/Dth from the prior month. (See historic chart below)

Natural Gas Storage Update: 

The storage report for week ending April 1st shows a withdrawal from storage of 33 Billion Cubic Feet (Bcf).  This puts levels below the 5-year average by 17.1%, and 22.4% below last year at this time.  Current percentage of total capacity is at 32% at 1,382 Bcf.

The chart below shows the current natural gas storage levels going back 24 months.

Electric Market 12-month average prices for current and future years shown in the chart below.

This chart shows the natural gas NYMEX Futures historic to current market average strip prices.

Energy News:
AEO2022 Issues in Focus: Exploration of the No Interstate Natural Gas Pipeline Builds case

Natural gas pipeline projects have come under increased scrutiny in recent years. Over the past few years, several large, interstate natural gas pipeline projects (such as the Atlantic Coast Pipeline, the Penn East Pipeline, and the Constitution Pipeline) have been cancelled following heightened legal and public pressure. In addition, in March 2021, the Federal Energy Regulatory Commission (FERC), which regulates interstate pipelines, announced that it would commit to considering greenhouse gas emissions and their contributions to climate change when assessing a proposed natural gas pipeline project’s environmental impact.

Read full article at EIA.GOV

Market Opportunity:   
Because of the high priced market affecting years farther out, long term contracts are still the best choice, but now come with increased risk.  

Note:  Our clients have the option of purchasing 100% of their electricity from renewable 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.


March 2022

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.

Definitions of Oil Products:

  • An Overview of Refinery Products and Processes | FSC 432: Petroleum RefiningPetroleum; a complex mixture of hydrocarbons that occur on Earth in liquid, gaseous, or solid form.  Commonly referred to a Crude Oil.
  • WTI Crude Oil; West Texas Intermediate (WTI) is a light, sweet crude oil that serves as one of the main global oil benchmarks. It is sourced primarily from inland Texas and is one of the highest quality oils in the world, which is easy to refine. WTI is the underlying commodity for the NYMEX’s oil futures contract.
  • Brent Crude Oil; a physical and financial market for crude oil based around the North Sea of Northwest Europe.

After crude oil is removed from the ground, it is sent to a refinery where different parts of the crude oil are separated into usable petroleum products. These petroleum products include gasoline, distillates such as diesel fuel and heating oil, jet fuel, petrochemical feed stock, waxes, lubricating oils, and asphalt.

Market Overview:

Energy price volatility is currently very high due to situations overseas.  Amidst the pressure of transitioning away from fossil fuels, and the huge increase in LNG exports to help Europe recover from an extreme 2020-21 winter, we now add the Russian invasion of Ukraine.  The war in Ukraine has had a profound impact on oil prices as Russian oil and natural gas supplies multiple European nations.  The invasion and sanctions cast doubt on the reliability of contractual relations, but at the time of writing this, natural gas and oil pipeline flows remain intact.

The U.S. imports petroleum from a variety of countries, with about 7% coming from Russia, some of which is refined and exported around the world.  The loss of Russian petroleum will add more pressure to the already elevated world market oil prices, however, based on EIA projections (shown in the chart below), we are now producing more petroleum than we consume here at home.          While the Russian economy collapses, the U.S. and countries around the world are feeling the impact of this war.  The higher oil prices leads to higher gasoline prices, increased price of everything we purchase, and of course increasing inflation rates.

Energy News: U.S. production of natural gas and petroleum and other liquids rises amid growing demand for exports and industrial uses

The EIA.Gov projects that U.S. consumption and production of petroleum and other liquids to grow through 2050. Domestic consumption and production levels of petroleum and other liquids remain relatively close to one another through most of the projection period in the Reference case. Consumption increases by 15%, and production increases by 17% from 2021 to 2050. However, consumption and production of specific petroleum products vary. We also project consumption and production of natural gas to grow through 2050. During the projection period, natural gas production grows by almost 24%, approximately twice as fast as consumption. Much of this growth in natural gas production is exported as liquefied natural gas (LNG). By 2050, we project that approximately 25% more natural gas will be produced than consumed in the United States. Together, these Reference case trends highlight the continued growth in demand for U.S. natural gas and petroleum products.

Re: Natural Gas Consumption;  According the our International Energy Outlook 2021, the EIA.Gov projects global natural gas consumption to continue growing through 2050 in absolute terms (and as a share of the world energy mix) because of its economics and lower carbon emissions relative to other sources of energy.

Continue reading this article at EIA.GOV

Natural Gas Storage Update: 

The storage report for week ending March 4th shows a withdrawal from storage of 139 Billion Cubic Feet (Bcf).  This puts levels below the 5-year average by 255 Bcf, and 216 Bcf below last year at this time.  Current percentage of total capacity is at 38% at 1,643 Bcf.

The March natural gas trading month price was determined on February 24th, and settled at $4.568, down $1.697/Dth from the prior month.

The chart below shows the current natural gas storage level and historic information.

Electric Market 12 month average prices for current and future years shown in the chart below.

This chart shows the natural gas NYMEX Futures historic to current market average strip prices.

Market Opportunity:   
The situation overseas has increased the uncertainty and importance of timing energy purchases.  Consider locking in long term to protect costs with the best bargains at 36 months or longer.

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 renewable 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.

The chart below shows the current natural gas storage level and historic information.


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