April 2018 Newsletter

April 2018 Energy Update

Key Drivers

  1. Natural gas prices have flattened with April NYMEX closing in late March at $2.691/MMBTU
  2. Natural gas continues to set new records 79.1 bcf/day or 7.3 bcf/day higher than a year ago.
  3. Oil prices are bullish with Crude Oil trading around $66/bbl.  New natural gas coming online is a result of expanded oil drilling.
  4. The economy is bullish with new orders of U.S. durable goods double February expectations.
  5. Natural gas storage levels is as of mid-March 1446 bcf or 31% lower than levels one year ago and about 18% lower than the 5 year average.

Commentary

 While natural gas NYMEX prices climbed to $3.63/MMBTU for a February start, February weather pushed prices back down to $2.691/MMBTU starting April.  Since February natural gas prices have flattened and stayed in a very tight trading range.  Those waiting for a bigger plunge may be disappointed.  Natural gas prices are trading near the low end of the past 18 month period due in part to:  We are in one of the shoulder seasons meaning winter needs are lessening and summer needs have yet to start, as well as  natural gas production in the U.S. is setting new record levels nearly every week.  If there was a time natural gas prices would plunge, it would be now.  If prices are trading near a 18 month low, why not plunge much deeper?  The answer is natural gas demand expectations.  The U.S. is becoming a world power in LNG exports with two new plants scheduled to start operation this year.  The economy is bullish.  Exports to Mexico are growing as more industrial loads come on south of the border.  Natural gas has overtaken coal as the major supply source for electric generation.  Summer is coming and with it the higher natural gas use in electric generation and natural gas fired electric peaking generation plants.  Plus, we can’t forget that natural gas storage levels that are currently well below the 5 year average that needs filled this summer prior to next winter.  We have a rapidly growing demand for natural gas.  Natural gas is being produced at a record level, but it may need to be even higher especially if we experience a hot summer.  We continue to advise our natural gas and electric customers to explore prices even out to 2021/2022.  Right now they are looking pretty attractive compared to where they have been and where they could be by the end of summer.  We always talk about the idea that part of an overall strategy is buying when there are opportunities and working to meet or beat budget.  If we haven’t already explored extended pricing for your accounts, please give us a call or email us so we can  look at the numbers and see how they look to you and your budget.

Remember that we post energy related articles each month that we feel are interesting and enlightening.  The most recent is about the U.S. and it’s growing LNG export business as we’ve become the world’s largest natural gas producer.  Find this article and many more on our Facebook pages:    https://www.facebook.com/rdenergypricechoice/.


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