In June Gulf well-head natural gas NYMEX commodity prices rose 48% to $2.917. Prices fell 8% in July to $2.672. What is driving the energy markets?
- Temperature outlooks across the U.S. are keeping the energy trading market bullish as the warmer than normal temperature trends continue.
- U.S. gas inventory is in great shape due to a large surplus coming out of last winter, however, storage injections this summer has lagged injection expectations. Last week the U.S. experienced a highly unusual summer storage withdrawal instead of an injection due to the hot weather and high natural gas consumption across much of the country..
- Natural gas is fueling electric generation this summer in a much bigger way due in part to the high temperatures across the U.S., low natural gas prices and green initiatives.
- This summer is competing with 2011 and 2012 for the warmest summer on record. The temps in all major cities across the nation have trended hotter than both the 30-year and 10-year averages.
Natural gas and electric prices run in close harmony with each other. Most often they run vary parallel by rising and falling together. However, although natural gas prices surged 48% in June, electric prices did not. As we enter the shoulder months of the year in September and October when natural gas usage is dropping as lower Fall temperatures kick in and before higher winter usage begins we will be watching for a natural gas shoulder season price dip. This will be a key time of the year for commercial and industrial consumers to be reviewing where they stand with their natural gas pricing for the next three years. Electric prices have remained low and not far from the historical low seen in February 2016.
We have many electric clients now with fixed rates extending until 2020. Historically, natural gas commodity prices have been lower for one year versus two years versus three years, etc. However, right now we’re seeing 12, 24 and 36 month commodity prices very flat throughout the term with long-term prices being only a little higher than short term prices, if at all. This is seen by many as a long-term buying signal especially when commodity prices are trading the lowest since 2008. Natural gas commodity prices were trading 45% higher just two years ago. With wholesale market prices at such an attractive level those with commodity contracts ending anytime from a couple of months to a couple of years should look at longer-term price possibilities.
Industry note: It appears that the first LNG (Liquefied Natural Gas) ship passed through the recently expanded Panama Canal to markets in South America on July 25th
. The Panama Canal greatly reduces travel time and transportation costs as the LNG ships travel to South America, Asia, the Middle East and Europe. Nearly 40 years ago the U.S. built LNG plants to import natural gas. Today those plants and more have been converted and built to export our vast natural gas supplies. Read moreRD Energy is Certified by the PUCO as a natural gas and power broker. RD Energy’s president has over 35 years of total energy experience and over 25 years in the deregulated energy industry as well as having received the Certified Energy Procurement Professional certificate from the Association of Energy Engineers. RD Energy believes in creating a strong and information based energy purchasing strategy. Timely buying, Load Analysis, Demand Response and Peak Load Management are key tools available to buyers. We often hear, “we have our energy purchases taken care of” from potential buyers. Given the opportunity RD Energy most often proves that more can be done to cut energy costs both for the short and long-term.
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