RD Energy Newsletter: August 2018

August 2018 Energy Update
Key Drivers

  1. Natural gas storage levels are 24% lower than last year and 20% lower than the 5 year average
  2. U.S. natural gas production has reached a new high, but rising demand is keeping storage injections low
  3. Mild weather in the mid-west is offset by blazing heat in South, Southwest and West
  4. High oil prices results in new drilling and new natural gas production as a by-product
  5. Wholesale NG prices are still range bound and currently trading at the bottom of the range
  6. Wholesale electric prices are near record lows for the years 2019 – 2022

Commentary

What is happening with the weather?  The Midwest is enjoying mild and beautiful weather as the jet stream has very uncharacteristically buckled in the center of the country, flooding is happening to the east while the south, southwest and west are blazing hot.  Until very recently the Midwest was very hot which pushed cooling demand to record levels, much of it fueled by natural gas.   Natural gas production in the U.S. continues to break new records as oil drilling and natural gas drilling are ramped up by high oil prices.  This would make you believe that with all the record natural gas production occurring making up the sizeable storage deficit from last winter would not be a problem.  However, the storage deficit hasn’t been reduced much during the first three months of the injection season.  Storage levels still sit at 24% lower than a year ago and 20% lower than the 5 year average.  With extreme heat expected in much of the country in August we are not forecasted to see much of a make-up possibility until the last two months of the injection season or September and October.  Natural gas demand has kept pace with the growth of natural gas production.  Cooling demand for natural gas has been very strong due to the heat and due to more generation facilities coming online that uses natural gas as its fuel source.

There are two extremely important questions that will be answered in the coming weeks and months: A. Will the storage deficit from last winter be made up in September and October prior to next winter as the cooling season winds down and B. The trade war has had little to no effect on energy exports to date, but if the U.S. leading energy export partners China, Asia, Africa and Mexico levy tariffs on energy imports, how will a very large drop in export volumes of oil and natural gas(LNG) effect all domestic energy prices?

Since electric and natural gas prices are trading at the lower side of the current wholesale range and wholesale prices in the forward years 2019 – 2023 are near historical low levels, we recommend reviewing how these future prices compare to your current contract price and if you can reduce your future cost for the next contract and budget term.  Even if your current rate is not up until 2019 or 2020 looking at prices is still prudent right now.  Please feel free to contact us to discuss your price and programs options.  Remember, at RD Energy we believe in working closely with customers to make sure an energy strategy is in place regardless if it’s just buying smarter when opportunities occur or for larger energy consumers applying more complex products like Peak Load Management and Demand Response that helps maximize energy savings.


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