RD Energy Newsletter: December 2017

December 2017 Energy Market Update

Key Drivers:
1. Natural gas closed at the end of November for December flow $.32/MMBTU higher than from a month earlier.
2. 2017 natural gas prices experienced both volatility and stability
3. December is forecasted to be colder than normal in the Midwest and Northeast
4. Natural gas storage has started the winter season slightly behind the past 5 years


Natural gas prices in 2017 started at the annual high at $3.93/MMBTU. Two short months later March 2017 had the lowest price of the year at $2.627/MMBTIU. Between April and December 2017 the natural gas wholesale market traded in a stable range between $2.75/MMBTU and $3.175/MMBTU. The 2017 average well head price ended at $3.108. Compared to the past 5 years of annual average prices 2017 ended right in the middle. 2013 and 2014’s annual averages were $3.652/MMBTU and $4.415/MMBTU respectively. 2015 and 2016 ended at $2.664/MMBTU and $2.46/MMBTU respectively.

2018 should be a very interesting year in the wholesale energy markets. There’s many bullish factors that will likely cause 2018 wholesale prices to end the year higher than 2017: a colder 2017/218 winter is expected, natural gas is now used for electric generation in a greater percentage than coal and growing, LNG exports are growing each year with more LNG plants coming online in the next year, exports to Mexico continues to increase each year and natural gas storage enters the winter season slightly below a year ago and the past 5 years. Even with a very cool August natural gas prices didn’t drop and storage didn’t get back on track. The big question exists: with all-time high natural gas production in the U.S. happening will it be enough to handle the growing demand. The answer is obviously no. The follow-up question is if natural gas production will increase above record production volumes fast enough to meet growing demand. If the U.S. experiences both a cold winter and a hot summer, 2018 prices will rise or fall based on the growth in natural gas production levels. Our recommendation is if you have natural gas and/or electric contracts ending in 2018 we should be looking at prices now to lock in numbers that will most likely be higher than your previous contract, but won’t be near as high as prices could be in the coming months.

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